Guarantees involving multiple group entities
We have read the EIOPA clarification issued on 20/05/2016 with regards to reporting of guarantees in these templates in the context of group reporting. We would like to seek further clarification on this matter. We would like to explain our question with the following example/scenario.
Assume entity A and B are within the same group and entity C is an external party. Suppose B has a loan payable due to entity C. Entity A issues a guarantee to entity C confirming that entity A will pay the loan in the event that entity B fails to settle it. In this instance the loan liability that entity B holds is reported in the group balance sheet. C (the external party) is the receiver of the guarantee.
a) Given the actual loan liability to entity C is already recorded in the group balance sheet, reporting this guarantee in the group’s S.03.0x template would result in double counting of liabilities. As such, we are of the view, that this guarantee should not be reported in the group’s S.03.01/S.03.03 template. Does EIOPA agree with us?
b) Further, as the receiver of the guarantee is an external party this guarantee does not fall under the scope of the S.36.04 template (IGT Internal cost sharing, contingent liabilities and off balance sheet items ) either. Does EIOPA agree with us?
We confirm that the guarantee should not be reported under S.36.04 template as it is not an IGT. However, the issuance of the guarantee from company A to company C has to be reported in the group S.03 template.