Response to consultation on RTS on methods of prudential consolidation
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It is necessary to clarify the link between Article 18 (3) of the CRR, Article 11 (3) of the draft RTS and the explanatory box, applied to insurance entities where it is stated that: “whilst institutions have to decide on a valuation of the participation not included in the scope of the prudential consolidation, competent authorities have the discretion to review the valuation method and potentially put into question the current application of the equity method”.
The EBA certainly does not intend to change the scope of application of the scope of consolidation in the RTS project. We point out therefore that It is unclear what is covered by the term review of the valuation method".
As drafted, Article 11 (3) of the draft RTS may be misleading as it could be understood that the competent authorities have the right to impose an evaluation method for insurance entities that are excluded for the prudential scope of consolidation but fully or proportionally consolidated under accounting standards.
The Pan European Conglomerate Club recommends that the EBA specify in the RTS project:
1) that insurance sector entities are excluded from the scope of prudential banking consolidation under the CRR.
2) that institutions should use the equity method for insurance entities
On this second point, the RTS would thus take into consideration the European Council's proposal concerning Article 18 of the CRR concerning the treatment of insurance entities in the context of prudential consolidation. The Presidency proposal introduces an explicit provision stating that institutions should use the equity method for insurance entities falling outside the scope of prudential consolidation. This states that the equity method does not constitute inclusion of those entities in consolidated supervision.
Such a proposal would have the merit of harmonizing prudential treatment within the EU and facilitating comparability.
Members of the Pan-European Conglomerate Club representing :
- BNP Paribas
- BPCE Group
- Caixa Bank
- Credit Agricole Group
- Credit Mutuel Group
- Danske Bank
- KBC Group
- La Banque Postale
- Société Générale
Contact : Michel BILGER (michel.bilger@credit-agricole-sa.fr)"
Question 1: Are there undertakings which do not comply with the definition of a financial institution or ancillary services undertaking of Regulation (EU) 575/2013 which should be included in the prudential scope of consolidation? Please explain and provide examples of these entities.
N/AQuestion 2: Do you consider SSPEs financial institutions? When SSPEs are consolidated for accounting purposes, do you also consolidate them for prudential purposes? Please differentiate in your answer between the situation when SRT is met and when it is not met (the institution originates the securitisation); and when the institution acts as an investor on the securitisation vehicle (whether this is a SSPEs or a special purpose entity used to set up securitisations) or sponsors the securitisation transaction.
N/AQuestion 3: Do you currently use the method of proportional consolidation for the consolidation of subsidiaries in accordance with Article 18(2) of Regulation (EU) No 575/2013? If proportional consolidation is used, please explain if the conditions included in Consultation Paper are met.
N/AQuestion 4: Do you have any comment on the conditions established in this Consultation Paper to apply proportional consolidation pursuant to Article 18(2) of Regulation (EU) No 575/2013?
N/AQuestion 5: Do you agree on the criteria for the determination of the consolidating entity? Do you experience a different situation currently?
N/AQuestion 6: Do you have any comment on the elements included in this Consultation Paper for the application of the ‘aggregation method’ pursuant to Articles 18(3) and (6)(b) of Regulation (EU) No 575/2013? Please explain.
N/AQuestion 7: Do you have any comment on the application of proportional consolidation according to Article 18(4) of Regulation (EU) No 575/2013?
N/AQuestion 8: Do you have any comment on the criteria established in this Consultation Paper on the prudential treatment of other participations or capital ties (including the equity method) under Article 18(5) of Regulation (EU) No 575/2013? Please explain.
The Pan-European Conglomerate Club believes that the EBA should review Article 11 (3).It is necessary to clarify the link between Article 18 (3) of the CRR, Article 11 (3) of the draft RTS and the explanatory box, applied to insurance entities where it is stated that: “whilst institutions have to decide on a valuation of the participation not included in the scope of the prudential consolidation, competent authorities have the discretion to review the valuation method and potentially put into question the current application of the equity method”.
The EBA certainly does not intend to change the scope of application of the scope of consolidation in the RTS project. We point out therefore that It is unclear what is covered by the term review of the valuation method".
As drafted, Article 11 (3) of the draft RTS may be misleading as it could be understood that the competent authorities have the right to impose an evaluation method for insurance entities that are excluded for the prudential scope of consolidation but fully or proportionally consolidated under accounting standards.
The Pan European Conglomerate Club recommends that the EBA specify in the RTS project:
1) that insurance sector entities are excluded from the scope of prudential banking consolidation under the CRR.
2) that institutions should use the equity method for insurance entities
On this second point, the RTS would thus take into consideration the European Council's proposal concerning Article 18 of the CRR concerning the treatment of insurance entities in the context of prudential consolidation. The Presidency proposal introduces an explicit provision stating that institutions should use the equity method for insurance entities falling outside the scope of prudential consolidation. This states that the equity method does not constitute inclusion of those entities in consolidated supervision.
Such a proposal would have the merit of harmonizing prudential treatment within the EU and facilitating comparability.
Members of the Pan-European Conglomerate Club representing :
- BNP Paribas
- BPCE Group
- Caixa Bank
- Credit Agricole Group
- Credit Mutuel Group
- Danske Bank
- KBC Group
- La Banque Postale
- Société Générale
Contact : Michel BILGER (michel.bilger@credit-agricole-sa.fr)"