To be eligible for Article 153(4) CRR, do firms need to have externally verified annual sales numbers, and if so how frequently should firms assess eligibility?
This question is on the application of a definition in the context of the LCR.
SMEs are defined in CRR Part 6 / LCR Delegated Regulation in accordance with the stated EU directive that defines an SME on the basis of thresholds for turnover, balance sheet size and number of employees.
Retail Corporates are defined in CRR Part 6 / LCR Delegated Regulation in accordance with CRR Article 153(4) which defines a Retail Corporate based on Turnover or Balance Sheet Size if more appropriate.
The question is whether in order to treat a corporate as a 'Retail Corporate' and hence as a 'Retail Customer' firms need to have:
1) externally verified turnover;
2) externally verified turnover, balance sheet size and number of employees.
If yes please state that this is the case and if no please state this is the case and what firms are expected to demonstrate here, as this would ensure a consistent application of the rules across the EEA.
According to the Article
3(8) of the Commission Delegated Regulation (EU) No 2015/61 (DR with regard to liquidity coverage requirement) 411(2) of Regulation (EU) No 575/2013 (CRR), retail deposits include a liability to an SME, where the SME would qualify for the retail exposure class under the standardised or IRB approaches for credit risk, or a liability to a company which is eligible for the treatment set out in Article 153(4) of Regulation (EU) No 575/2013, and where the aggregate deposits by such SME or company on a group basis do not exceed EUR 1 million.
As neither the Regulation (EU) No 575/2013 nor the Delegated Regulation (EU) No 2015/61 requires a verification of the criteria mentioned above by an external auditor, institutions should determine their own methodology for assessing the level of the criteria. The methodology for assessing the criteria should be consistent over time and should also include updating the information about total annual sales on a regular basis.
Update 26.03.2021: This Q&A has been updated in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).