Question ID:
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Accounting and auditing
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Disclose name of institution / entity:
Name of institution / submitter:
Country of incorporation / residence:
Type of submitter:
Competent authority
Subject Matter:
IFRS 9 Transitional Arrangements - Business Combination

There is a business combination between banks which decided to apply the static and dynamic phase in the arrangements envisaged by Article 473a CRR.

1) How should the static phase-in arrangements envisaged by Article 473a CRR apply on the consolidated basis?

2) How should the dynamic phase-in arrangements envisaged by Article 473a CRR apply on the consolidated basis?

Background on the question:

As a consequence of a business combination, a new banking group has been set up, and a control relation has been established between parent and subsidiaries.

The parent undertaking (which has not changed) and the subsidiaries had informed the competent authority in the past that they would make use of the transitional arrangements (both dynamic and static) of Article 473a CRR.

Now the group has been extended and a number of new entities (which will all be subsidiaries) will become part of the group. All these entities were also IFRS reporters in the past, the parent undertaking also on the previous consolidated basis.

Date of submission:
Published as Final Q&A:
Final Answer:

The static component of the transitional arrangement (Article 473a of the Regulation (EU) No. 575/2013) is based on the amounts recognised by institutions as IFRS 9 expected credit losses on “1 January 2018 or on the date of initial application of IFRS 9” and as IAS 39 impairment amounts on “31 December 2017 or the day before the initial application of IFRS 9” respectively. Given that the newly acquired subsidiaries were not part of the consolidated balance sheet of the group at either of those dates, the amount to be considered under the “static approach” would therefore not change as a result of the described business combination.

In the case of the dynamic component calculation, the amount subject to the application of transitional arrangements is calculated at the end of each reporting period by comparing the total amount of expected credit losses for non-credit impaired instruments at the reporting date with the amount as of 1 January 2018 2020 or the date of initial application of IFRS 9 (paragraphs 3(a) and 3(b) respectively of Article 473a), whichever is later. In this case, from the moment that the new subsidiaries are included in the consolidated financial statements of the group, at each specific reporting date, the respective expected credit losses recognised individually by the new subsidiaries that are now part of the consolidated figures are relevant for the calculation of the amount referred to in Article 473a(3)(a). This is valid for the “new dynamic” component introduced with Regulation (EU) 2020/873 amending Regulations (EU) No 575/2013 and (EU) 2019/876. As regards the “old dynamic” component, the relevant reference dates to be considered when comparing the level of expected credit losses, as established under paragraph 1 of Article 473a, are 1 January 2020 and 1 January 2018 or the date of initial application of IFRS 9, whichever is later.

Final Q&A
Answer prepared by:
Answer prepared by the EBA.
Note to Q&A:

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

Update 28.10.2021: This Q&A has been amended in light of the change(s) in Article 473a to Regulation (EU) No 575/2013 (CRR), applicable from 27.06.2020.