Can the national discretion in Article 24(2) of Regulation (EU) No 575/2013 be applied at solo level, for prudential purposes in spite of the fact that institutions are not allowed according to national legislation to apply IFRS at solo level for general financial reporting purposes?

According to the national accounting regulation at solo level the local accounting standards are compulsory for every institutions, which would imply that at solo level the own fund requirement should also be determined according to local GAAP, while the consolidated requirement will be based on the different applicable accounting frameworks - either local GAAP or IFRS. According to our present national accounting regulation institutions are not allowed to apply IFRS at solo level for general reporting purposes. But according to our understanding Article 24 (2) means that competent authorities may require institutions - other than those, who are obliged to apply the IFRS at consolidated level on the basis of Regulation (EC) No 1606/2002 - to apply IFRS for the determination of own funds and related prudential reporting at consolidated level.

Article 24(2) of Regulation (EU) No 575/2013 (CRR) stipulates that competent authorities may require that, for regulatory purposes, institutions value assets and off-balance sheet items and determine own funds in accordance with the international accounting standards as applicable under Regulation (EC) No 1606/2002. If the competent authority requires the use of IFRS according to Article 24(2), institutions shall value assets and off-balance sheet items and determine own funds in accordance with IFRS notwithstanding any national laws requiring the use of other accounting standards for the valuation of assets and off-balance sheet items and the determination of own funds.

This regulatory option for the competent authority is without prejudice to the national laws on annual accounts for financial reporting purposes. 

It should be noted that competent authorities shall grant a transition period of 24 months to institutions which have to apply IFRS for the first time as set out in Article 466 of the CRR.

DISCLAIMER:

This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Internal Market and Services) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.

Update 26.03.2021: This Q&A has not yet been reviewed by the European Commission in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).