• Question ID: 2018/0028
• Date of publication: 29/06/2018
• Subject matter: Protection items in AnaCredit
• AnaCredit Manual: Part II
• Data attribute: Protection value

Question

In the case of instruments secured by financial guarantees in which the individual guarantee covers a percentage of the outstanding nominal amount rather than the absolute value, is the attribute “protection value” supposed to be updated as the instrument is being repaid?

Answer

As indicated in Section 9.4.4 of Part II of the AnaCredit Reporting Manual, the “protection value is based on the most recent valuation carried out prior to the reporting reference date”.

To that extent the Manual clarifies that for protection items valued at their notional amount, it is the date on which the notional amount changed for the last time prior to the reporting reference date. Furthermore, Table 110 of Part II of the AnaCredit Reporting Manual indicates that in the case of financial guarantees other than credit derivatives, the type of protection value is the notional amount.

Therefore, given that the protection value has to reflect the conditions of the contract relating to the specific financial guarantee and, where indicated , elements of the instrument, it follows that if the protection secures a part of the principal (as a percentage), then the protection value is updated as the principal is repaid.

Related questions

See also Clarification regarding the type of protection value