Question ID: 44
Regulation Reference: Guidelines on submission of information to NCAs (Preparatory phase)
Article: 35, 72
Template: S.23.01
Status: Final
Date of submission: 14 Aug 2014
Question
Please, could you verify the formulae in cells C50 (OF-B1Q LOG-S.23.01.a.b) and C50A (OF-B1Q-L-S.23.01.f.g) ?
Cell C50 (or mutatis mutandis C50A) refers to "Total eligible own funds to meet the SCR – tier 1 restricted items". The formulae stated in that cell is:
C50=MAX(0,(MIN(B50*0.25, C46)))
However, as prescribed in paragraph 3 of Article 72 EOF1 from the Draft Delegated Acts as at 10 January 2014 (or any other previous version) [see background information], these basic own-fund items shall make up less than 20 %.
If my review is right, the formulae for cell C50 should be MAX(0,(MIN(B50*0.20, C46))).
Please, Would you mind reviewing my interpretation and, if I am right, amend the typo in cells C50 and C50A?
EIOPA answer
The formula in in fact correct.
C50=MAX(0,(MIN(B50*0.25, C46)))
The objective is to define the amount of eligible restricted Tier 1 to cover the SCR.
The relevant cells are:
C50 - Total eligible own funds to meet the SCR – tier 1 restricted items
B50 - Total eligible own funds to meet the SCR – tier 1 unrestricted items
C46 - Total available own funds to meet the SCR – tier 1 restricted items
Article 72 of the draft delegated acts defines how certain Tier 1 items are restricted in relation to the total amount of eligible Tier 1 own funds, (up to a maximum of 20%).
The formula for C50 is derived from B50 and not from total amount of eligible Tier 1 items, which is why it is not 20%.
So to define the amount of restricted eligible Tier 1 items we need to assess the relationship between the restricted and unrestricted Tier 1 items. This lead us to the formula C50 <= 25% * B50 (restricted T1 <= 25% of unrestricted T1).
So C50 has a maximum (B50 * 0.25) even if C46 is higher due to the operation of the limit in Article 72. C50 would equal C46 where C46 is lower than (B50 * 0.25).