FINREP Template F 09.02 - Financial guarantees received. In the position 'Financial guarantees received' items that meet the definition according to article 58 of Annex V of the ITS on Supervisory reporting should be reported. In this context, in case the bank has a surety contract, which is a legally binding agreement that the signee will accept responsibility for another individual's contractual obligations (usually the payment of the loan contractual obligations if the principal borrower falls behind or defaults), should it be reported in the position 'Financial guarantees received' or in the position 'Other Commitments received'? Also in case of several surety contracts related to one loan obligation that aren't prioritized and have equal legal force which allocation principles should be applied according to article 63 of Annex V of the ITS on Supervisory reporting.
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According to IAS 39.9 a financial guarantee contract is defined as follows: “A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.” It defines the financial guarantee in economic terms and not in legal terms for accounting purposes.
IAS 39 AG 4 specifies: “financial guarantee contracts may have various legal forms, such as a guarantee, some types of letter of credit, a credit default contract or an insurance contract. Their accounting treatment does not depend on their legal form.”
If the surety contract fulfills these definitions, it should be categorized as “financial guarantees received” in template F 09.02 of Annexes III and IV of Regulation (EU) No 680/2014 (ITS on Supervisory Reporting). If not, it should be attributed to “other commitments received”. In any case, the reporting institution should apply the categorization consistently.