We have a question relating to group reporting in S.06.02.04, cell C0100 “Asset pledged as collateral”, more specifically to do with how assets kept in the undertaking's balance-sheet that are pledged as collateral should be identified, when Method 1 is applied. In line with the instructions, assets kept in the undertaking's balance-sheet that are pledged as collateral should be identified.  

In the General Comments to S.06.02 it is stated that when method 1 is used exclusively, the reporting shall reflect the consolidated position of the assets. The above means effectively that subsidiaries of a reporting parent undertaking in the solo reporting that are recorded/reported in one row, should instead be consolidated in line with the rules set out in Article 335, paragraph 1, (d), (e) and (f) of Delegated Regulation (EU) 2015/35.

We have taken the above to mean that the assets in S.06.02.04 at group level should be reconcilable with the information provided about the assets in the consolidated group solvency balance sheet included in QRT S.02.01.

As an example, suppose we have a parent undertaking that is obligated to provide both solo reporting and group reporting. It has a 100% wholly owned subsidiary entity, which due to a transaction initiated, is in S.06.02.01 an asset kept in the undertaking's balance-sheet that is 100% pledged as collateral pledged, while said transaction is ongoing.

As an added complication, suppose that in turn, the subsidiary in turn has assets in its balance sheet against which it has pledged collateral, corresponding to 25% of the assets kept in the undertaking's balance-sheet.

In the solo reporting of the parent undertaking, it seems straightforward to assume that option “1 — Assets in the balance sheet that are collateral pledged” would be selected, as the subsidiary is recorded in one line in S.06.02.01.

However, we are uncertain what the treatment would be at consolidated level in the group reporting.

The collateral pledged by the parent undertaking relates specifically to the shares of the subsidiary (which are pledged) and we do not think that the appropriate treatment would be to re-map that collateral against the assets and liabilities of that subsidiary entity consolidated, partially as that is not actually the assets pledged in this case and partially as there would already be collateral pledged against assets of the consolidated subsidiary, which already emanate from the subsidiary itself.

As the subsidiary would no longer be recorded in one row in S.06.02.04 as in the solo reporting, but instead be consolidated, the recording of the assets in the balance sheet that are collateral pledged against the subsidiary’s shares would no longer be reported at group level. The collateral pledged in the subsidiary relating to its assets, however, would be recognized in the group QRT.  

Is the above interpretation on how to record an “Asset pledged as collateral” in cell C0100 in S.06.02.04 correct?