Common Issues on Schedule G-2

Common Issues on Schedule G-2

Overview

Schedule G-2 of the Federal Reserve’s FR 2590 report is used to report repurchase agreement (repo) exposures under the Single Counterparty Credit Limits (SCCL) rule. It is one of the more technical schedules, requiring institutions to break down their repo and reverse repo exposures by counterparty, collateral type, maturity, and risk weight. The purpose of this schedule is to help regulators monitor and limit the concentration of credit exposures to individual counterparties. Accurate reporting is key to staying compliant with SCCL under 12 CFR Part 252, Subpart H. However, many institutions face recurring challenges when completing Schedule G-2. In this post, we highlight the most common issues and provide recommendations based on industry best practices and GLOBAL ABAS’s advisory experience.

Regulatory Requirement

The SCCL rule requires covered companies to report their gross credit exposures from repurchase agreements. Schedule G-2 captures the following key elements:
  • Transferred and Received Assets: Firms must distinguish between assets they have transferred in a repo and assets they have received in a reverse repo.
  • Maturity Buckets: Firms must group exposures by their contractual maturity: less than or equal to 1 year, more than 1 year to 5 years, and more than 5 years.
  • Risk Weights: Each transaction must be assigned a risk weight based on the type of underlying collateral as defined in Regulation Q (typically 0%, 20%, 50%, or 100%).
  • Eligible Collateral: Recognized collateral can reduce gross credit exposures, provided it meets eligibility standards.
  • Bilateral Netting: Firms may reflect the benefits of legally enforceable bilateral netting agreements, which allow offsetting of repo and reverse repo exposures with the same counterparty.
These requirements are designed to ensure that institutions are accurately reflecting both their direct exposures and the risks transferred through collateral.

Common Challenges

While the rules are clear in principle, implementation can be difficult. Below are the most common issues firms encounter when preparing Schedule G-2:

1. Asset Misclassification

Many firms incorrectly classify the collateral underlying their repo transactions. For example, sovereign bonds may be misclassified as non-sovereign or vice versa. These errors directly affect the risk weight assigned and lead to incorrect exposure figures. Misclassification often stems from inconsistent reference data or unclear internal definitions.

2. Maturity Bucket Errors

Another frequent challenge is placing repo transactions into the correct maturity bucket. This requires clear tracking of contractual maturity dates. However, system limitations or manual processes often lead to errors, such as classifying a 13-month repo as under 1 year.

3. Bilateral Netting Application Mistakes

Applying netting adjustments is complex, especially when multiple transactions with a single counterparty are involved. Firms often miscalculate the net exposure due to inconsistent legal documentation, missing netting agreements, or flawed system logic.

4. Risk-Shifting to Collateral Issuers

Under SCCL, when qualified collateral reduces the exposure to the original counterparty, a new exposure arises to the issuer of the collateral. Many firms fail to account for this risk shift correctly. This leads to underreporting of exposures to collateral issuers, which is a serious regulatory concern.

5. Incorrect Collateral Haircuts

Collateral must be adjusted using regulatory haircuts defined in 12 CFR 217.132. Firms often mistakenly apply internal or capital model haircuts instead. This results in incorrect valuation of the collateral and inaccurate gross exposure figures.

6. Data and System Limitations

Accurate reporting requires data on collateral type, maturity, counterparty structure, and legal agreements. This data is often spread across multiple platforms, making it hard to consolidate and validate. Outdated or siloed systems can delay or distort reporting.

7. Inconsistent Internal Model Use

Firms approved to use the Internal Models Method (IMM) for capital reporting must ensure consistency with SCCL reporting. However, some firms incorrectly apply IMM exposures to FR 2590 without necessary adjustments, causing misalignment across regulatory reports.

Peer Approaches

To improve accuracy and reduce compliance risks, leading institutions are adopting several best practices:
  • Automated Data Integration: Implementing automated data feeds across legal entities to consolidate repo and reverse repo exposures in real-time.
  • Standardized Identifiers: Using consistent counterparty identifiers to support accurate aggregation and reduce duplication.
  • Maturity and Collateral Checks: Running systematic checks to validate maturity classifications and recalculate collateral values with appropriate haircuts.
  • Reconciliation Processes: Comparing SCCL exposure calculations with capital models to ensure alignment and identify discrepancies.
  • Strengthened Controls: Enhancing documentation and internal controls around risk-weight assignment, haircut application, and netting treatment.

GLOBAL ABAS View

At GLOBAL ABAS, we help institutions strengthen their SCCL reporting by focusing on the following key areas:

1. Robust Data Governance

We recommend building centralized data governance frameworks. These frameworks standardize how repo exposures are defined, tracked, and reported across business lines and systems.

2. Standardized Procedures

Firms should adopt clear and consistent procedures for applying collateral haircuts and calculating bilateral netting benefits. This reduces manual errors and ensures uniform application of regulatory rules.

3. Mapping Between Capital and SCCL Reporting

We advise clients to maintain detailed mapping between Regulation Q capital requirements and SCCL exposure rules. This ensures consistent and accurate treatment of exposures across reports.

4. Regular Internal Audits

We encourage clients to perform internal audits of their SCCL reporting process, including Schedule G-2. These audits help catch issues early and reinforce regulatory confidence.

Final Thoughts

Schedule G-2 is a technically demanding part of the FR 2590 report. Errors in this schedule can lead to misreported exposures and, ultimately, non-compliance with the SCCL rule. By investing in better data systems, clear procedures, and strong internal controls, firms can improve reporting accuracy and reduce regulatory risk. To learn more about how GLOBAL ABAS can support your SCCL compliance program, visit our website or subscribe for future updates.

Disclaimer: This blog post is for informational purposes only and reflects our understanding of the SCCL rule and FR 2590 reporting as of the date of publication. It does not constitute legal, regulatory, or professional advice. Institutions should consult with internal and external advisors and refer directly to the SCCL rule (12 CFR Part 252, Subpart H) and FR 2590 instructions for specific guidance. GLOBAL ABAS disclaims any liability for actions taken or not taken based on this information.

Consult a GLOBAL ABAS Consulting, LLC professional regarding your specific issues and questions. Your feedback will help us improve the SCCL Compliance Lab. Please let us know what you think in the Comment below. Copyright © 2025 GLOBAL ABAS Consulting, LLC. All rights reserved.

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