Does "off-balance sheet item" as in article 5 point (1) CRR mean:
a) off-balance sheet item disclosed under the applicable accounting framework, or
b) off-balance sheet item under the applicable accounting framework, irrespective whether the item is disclosed or not, or
c) every position or item exposed to credit risk that is not recognised in the balance sheet, irrespective whether such
position or item would be disclosed or considered as off-balance sheet item under the applicable accounting framework?
Article 5(1) CRR provides the definition of 'exposure' for the purposes of Part Three, Title II as follows: "‘exposure’ means an asset or off-balance sheet item".
Previous guidance by the CRDTG on the similar article 77 of the Directive 2006/48/EC clarified the following: "[...] The main purpose of Article 77 is to make clear that, for calculating minimum own funds requirements, each position exposed to credit risk is to be taken into account, independent of whether this position is recorded in the balance sheet or is an off-balance sheet item. With respect to Directive 86/635/EEC this purpose is achieved by defining a (credit risk)exposure as an asset or off-balance sheet item. In case of using another accounting framework a credit institution should consequently read Article 77 with respect to this purpose, i.e., “asset” meaning all on-balance sheet items exposed to credit risk.[...] "
This explanation implies that "asset", as also used in the identical Article 5 (1) CRR, should be interpreted to have a different (i.e. broader) meaning than the accounting notion of 'asset': the words are the same, but the meanings are different. This interpretation is further supported by the fact that the CRDTG (question 69) explained that also a derivative contract with a negative fair value, that is recorded on the balance sheet as a liability, is in the scope of the credit risk framework. The EBA has shown to hold a similar view as evidenced by Q&A 611 and Q&A 666..
Unfortunately, the answer by the CRDTG did not clarify whether "off-balance sheet item", as also used in the identical art 5 point (1) CRR, should also be interpreted to have a different (i.e. broader) meaning than the accounting notion of 'off-balance sheet item'. The question raised becomes more pertinent as under the applicable accounting framework, not all off-balance sheet items are required to be disclosed. However, from a prudential perspective, these undisclosed items may still be relevant.