Response to discussion on the impact on the volatility of own funds of the revised IAS 19 and the deduction of defined pension assets from own funds

Go back

Is the scope of the report appropriate? Are there additional elements to include in the scope of the report based on this mandate?

We recommend a harmonisation of the following definitions (page 4) or, moreover, a clearer definition: “net pension assets, net pension liabilities, “net benefit pension fund assets or liabilities" as well as “defined benefit pension funds".

Furthermore, due to the fact that the rationale for certain conclusions will be difficult to comprehend otherwise, we recommend a more detailed elaboration of the individual scenarios, e.g. the scenario featuring a regulatory deduction position/net pension asset or the scenario without a regulatory deduction position/net pension liability or defined benefit pension obligations which are not funded through plan assets."

Do you agree with the proposed methodology for the objective of the report to be met? Please indicate whether additional areas need to be considered.

Basically, we agree with the proposed methodology/approach (qualitative, quantitative, additional considerations).

However, in our preliminary understanding there is no recommended course of action for the legislative process.

Do you agree with the identified prudential requirements relevant to the scope of the report? Are there additional elements to include in the analysis of the prudential requirements?

We have strong doubts over the fitness for purpose of a regulatory deduction position (cf. our general comments above). Particularly the fact that the allocation of plan assets shall not be recognised directly in equity for accounting purposes (per plan assets to cash assets) speaks against a deduction of an asset surplus.

Do you agree that the main drivers of the change in the amount of net defined benefit pension funds would be items for which a corresponding gain or loss is recognised on own funds (such as actuarial gains and losses)?

No, we do not agree (cf. our general comments, scenarios, b) and our response to Q3).

Do you agree with the analysis performed on the amendments to IAS 19? Do you agree that the changes in IAS 19 relevant to the scope of this report are the immediate recognition of actuarial gains and losses and past services costs? Please provide input on additional changes in IAS 19 that need to be taken into consideration in assessing the impact on own funds at initial application and application in subsequent periods under the scope of the report.

From the point of view of a company which previously applied the corridor method this is likely to be the case (cf. our general comments on possible constellations). „Defined benefit pension fund in EBA/DP/2014/01 point 34: cf. our response under Q1."

Do you agree with the analysis performed for the changes of IAS 19 that are not expected to have an impact on own funds with regards to the scope of this report?

The analysis of the revised IAS 19 (2011) appears to be complete. However, this analysis was divorced from the potential scenarios (c.f. General Comments above); In our view, it is incomplete or, moreover, not sufficiently clear.

Do you agree with the methodology of the analysis performed and the interpretation of the qualitative and quantitative data? Please provide additional data that need to be taken into account.

We are unfamiliar with the data on which the analysis is based. Hence, any assessment thereof would be premature.

Do you agree with the elements included in the additional qualitative assessment for the possible developments that could impact the volatility of own funds? Do you have any particular consideration with regard to the impact of the discount rates used for the measurement of the defined pension plans under the requirements of the revised IAS 19? Is there any difference compared to the previous IAS 19? Please provide additional elements that need to be taken into account.

n/a

Upload files

Name of organisation

German Banking Industry Committee