According to article 318.1 CRR, institutions shall develop policies and criteria for mapping the relevant indicator for activities into the framework set out in article 317. Additionally, the relevant indicator is defined in article 316 CRR as the aggregation of seven profit and loss account elements, which should be included with its positive or negative sign.

According to Basel II framework, the relevant indicator of retail banking business line “will consist of net interest income on loans and advances to retail customers and SMEs treated as retail, plus fees related to traditional retail activities, and net income from other swaps and derivatives held to hedge the retail banking book, and income on purchased retail receivables”.

Also according to this framework, the relevant indicator, referred to as gross income, is to be calculated at the level of a business line: “Within each business line, gross income is a broad indicator that serves as a proxy for the scale of business operations and thus the likely scale of operational risk exposure within each of these business lines. The capital requirement for each business line is calculated by multiplying gross income by a factor (denoted beta) assigned to that business line.”

With respect to the retail banking business, usually the branch network carries out diverse activities which support the lending and deposit acceptance. In these cases, there is not a specific and separate profit and loss account for the purposes of registering this activities’ income and expenses. Therefore, the flows arising from these activities will be accounted for together with the lending and acceptance of deposits, as well as with other ancillary activities, within the network branch internal management “retail banking” business profit and loss account.

However, some other profit and loss elements pertaining to the same “retail banking” area in the network branch (certain commissions, net income from certain derivatives …) might be mapped into business lines other than “retail banking” (as could be “retail brokerage” and “asset management”, respectively), but  in the case of the previously described ancillary activities, its relevant indicator cannot be calculated because other income and expenses linked to this activity are unknown (i.e. its corresponding part of interest payable, commissions or fees payable, etc.).

Therefore, we consider that activities for which a relevant indicator cannot be calculated should be considered ancillary activities and should therefore be mapped to the activity of Table 2 in Article 317 CRR that they support, according to article 318, 2 (b) CRR. However, we consider that it should not be a requirement to have a separate profit and loss account as at legal entity level, since internal or management accounting should also be appropriate for this purposes.