How should the instructions from Regulation (EU) 2021/451, (ITS), Annex V, Part 2, paragraph 92 ‘Institutions shall report loans and advances to non-financial corporations which engage in financial or insurance activities in ‘K – Financial and insurance activities’’ be understood?
As an example, should a counterparty whose primary activity is NACE code 7010 ‘Activities of head offices’ (sector M), who also performs the activity ‘other financial service activities, except insurance and pension funding n.e.c.’ (NACE code 6499) be presented in F 06.01 in sector K ‘Financial and insurance activities’ or in sector M ‘Professional, scientific and technical activities’?
In the original F 06.01 template, sector K ‘Financial and insurance activities’ was not included. Based on the applicable instructions at the time, EBA also confirmed via an earlier Q&A 2013_559 (now archived as a result of updates to the DPM) that a category K need not to be included.
With EBA DPM 2.7, sector K ‘Financial and insurance activities’ was introduced into template F 06.01. Annex V to ITS was then amended to include the current instructions.
The documentation from EBA DPM 2.7 however does not appear to provide further guidance to this change. It seems that based on the different classes/descriptions as included for Section K in ‘NACE Rev. 2’, that counterparties that have as primary activity one of the classes from Section K ‘Financial and insurance activities’ would not classify as ‘non-financial corporation’ (and they are not in scope of F 06.01). An example of a case that should be reported in F 06.01 in class K would therefore be helpful for a common understanding of the applicable instructions.
For the reporting of sector K 'Financial and insurance activities' of template F 06.01., the instructions are given in the NACE Regulation and in Annex V, Part 2, paragraph 92 of Regulation (EU) 2021/451. According to these instructions, institutions shall report loans and advances to non-financial corporations which engage in financial or insurance activities in “K Financial and insurance activities”.
As a general rule, as indicated in the question, when the main activity of a company is financial, it is classified within the different classes/descriptions included in Section K of 'NACE Rev. 2', 'Financial and insurance activities' and is sectorized as 'financial institution'; consequently, it does not fall within the scope of F 06.01.
One possible example could be included in F 06.01 and it concerns non-financial holding companies. According to NACE Rev. 2, holding companies are defined as: units that hold the assets (owning controlling-levels of equity) of a group of subsidiary corporations and whose principal activity is owning the group. The holding companies in this class do not provide any other service to the businesses in which the equity is held, i.e. they do not administer or manage other units. This class excludes active management of companies and enterprises, strategic planning and decision making of the company, and such entities are classified as head office (NACE Rev. 2, M 70.10).
In conclusion, holding companies whose subsidiary corporations are non-financial corporations would be considered as non-financial corporations and classified in section K 'Financial and insurance activities', for the purposes of template F 06.01.