In applying the definition of “large financial sector entity” under Article 142(1)(4)(a) of Regulation (EU) No 575/2013, is it correct to consider the assets of the counterparty (individual or consolidated balance sheet), rather than consolidated assets for any Group to which the counterparty belongs?

The definition of “large financial sector entity” under Article 142(1)(4)(a) of Regulation (EU) No 575/2013 sets a threshold greater than or equal to € 70 billion, calculated on an individual or consolidated basis. It is not clear how wide is the consolidation perimeter to consider, especially in the light of the Basel III framework, which is more comprehensive as it extends to exposures to any entity of a group where parent or subsidiaries have consolidated assets above a comparable threshold of USD 100 billion.

Article 142(1)(4) of Regulation (EU) No 575/2013 (CRR) defines a large financial sector entity as an entity which meets inter alia the condition that its total assets are greater than or equal to a EUR 70 billion threshold. Furthermore it is stated that the assets of the entity in question are calculated on an individual or consolidated basis. As Article 142(1)(4) (a) of the CRR only refers to the asset owned by the entity in question itself, for the purposes of assessing whether the threshold is met on a consolidated basis, the relevant scope of consolidation includes the entity itself and its subsidiaries but not the wider group to which the counterparty together with its subsidiaries may additionally belong.

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.