Question ID:
2014_1618
Legal Act:
Regulation (EU) No 575/2013 as amended by Regulation (EU) 2019/876 – CRR2
Topic:
Supervisory reporting
Article:
Annex XI
Paragraph:
LR 4_2
Subparagraph:
Row 240
COM Delegated or Implementing Acts/RTS/ITS/GLs:
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)
Article/Paragraph:
annex XI, LR4, row 240
Type of submitter:
Credit institution
Subject Matter:
Definition of financial corporates for Leverage Ratio and FinRepITS
Question:

Is the definition of financial corporates really different in the Leverage Ratio and FinRep ITS?

Background on the question:

Leverage Ratio defines Financial Corporates as exposures falling under article 122 or 147 (2)c of the CRR (asset class Corporates) where the business of the customer includes activities listet in annex I of the CRD or if the customer falls under article 4(1)(27) of the CRR.

FinRepITS defines financial corporations as: all financial corporations and quasi-corporations other than credit institutions such as investment firms, investment funds, insurance companies, pension funds, collective investment undertakings, and clearing houses as well as remaining financial intermediaries and financial auxiliaries.

These definitions lead to different categorisations for each report. E.g. claims against UCITs will be reported as financial corporates in FinRepITS (as well as in the LCR/NSFR), but will be non-financial corporates in the Leverage Ratio since they are not included in the above definition.

Date of submission:
14/11/2014
Published as Final Q&A:
04/10/2019
EBA Answer:

The definition of ´Financial Corporates´ in Annex XI of C 43.00 (LR 4) is not linked to the category ´Other financial corporations´ used in FINREP (and other parts of the ITS on supervisory reporting).

For the purpose of leverage ratio reporting, the definition of “financial corporates” in Annex XI, LR4 {C 43.00, r240, c*} of the Commission Implementing Regulation (EU) No 680/2014 (ITS on supervisory reporting), as amended, means “regulated and unregulated undertakings other than institutions [i.e. credit institutions and investment firms, which are reported in {r180; c*}], the principal activity of which is to acquire holdings or to pursue one or more of the activities listed in Annex I to Directive 2013/36/EU, as well as undertakings as defined in Article 4(1)(27) of the CRR other than institutions”. Indeed, article 4(1)(27) of the CRR includes institutions, financial institutions, ancillary services undertakings included in the consolidation perimeter, insurance undertakings (including those excluded from the scope of directive 2009/138/EU [Solvency II] according to art. 4 of this Directive) and insurance holding companies.

For the purposes of FINREP, the exposures is assigned only on the basis of counterparty sector according to the nature of the immediate counterparty,  Consequentially, the financial sector includes both “credit institutions” as defined in in Part 1, paragraph 42, lett. c) of Annex V of the ITS on supervisory reporting and “other financial corporations”, which are all financial corporations and quasi-corporations other than credit institutions such as investment firms, investment funds, insurance companies, pension funds, collective investment undertakings, and clearing houses as well as remaining financial intermediaries, financial auxiliaries and captive financial institutions and money lenders as defined in Part 1, paragraph 42, lett. d) of Annex V of the ITS on supervisory reporting.

A reconciliation between the FINREP definition of “Other financial corporations” and the aggregate “Financial corporates” is not even considered in the mapping of exposure classes used to calculate capital requirements according to the CRR and counterparty sectors used in FINREP tables (Part 3 of Annex V of the ITS on supervisory reporting), since in the mapping no breakdown is given for the exposure class “corporates” according to art. 112 of the CRR.

Status:
Final Q&A