Question ID: FICOD032 - 2945
Regulation Reference: (EU) 2022/2454 - ITS with regard to supervisory reporting of risk concentrations and intra-group transactions (FICOD, (EU) 2023/894 - ITS with regard to the templates for the submission of information necessary for supervision
Topic: Reporting templates on risk concentrations and intra-group transactions for conglomerates (FICOD), Intra-group transaction
Template: S.36.01, S.36.02, S.36.03, S.36.04
Status: Final
Date of submission: 26 Dec 2023
Question
Could you provide additional detail/clarification regarding the inclusion of intragroup transactions within a single economic operation?
Background of the question
The general instructions for templates S.36 states that "where two or more transactions between entities of the group which, from an economic perspective, contribute to the same risk, or, serve the same purpose / objective or are temporally connected in a plan, they shall be considered as a single economic operation". The approach however seems broad, and we were wondering if more specific rules are to be followed when regrouping transactions.
EIOPA answer
Where two or more transactions between entities of the group which, from an economic perspective, contribute to the same risk, or, serve the same purpose / objective or are temporally connected in a plan, they shall be considered as a single economic operation (SEO). Financial conglomerates are primarily responsible, on the basis of their business model, to determine situation where transactions shall be grouped as SEO. The methodology for grouping transactions in SEO is expected to be documented and shall be provided to the Coordinator.
As such each transaction which is part of a single economic operation shall be reported whenever collectively they are at or above the corresponding threshold for significant intra-group transactions, even though individually the transactions fall below the thresholds. Examples of typical SEO:
- A succession of the same transaction (e.g. a tranche of loans) or several transactions that contribute to same risk (e.g. any type of funding between two identified undertakings);
- Different transactions to serve purpose of funding the same counterparty or type of counterparties (e.g. investment by an insurance undertaking in debts issued by several banks of the financial conglomerate could be considered as an SEO).
The purpose of identifying the SEO is to ensure that all relevant transactions are reported. If not, it could happen that due to the split into several transactions, they would not be reported if individually they fall below the threshold. For the avoidance of any doubt, a given SEO may group transactions that are of different types (e.g. debt, off balance sheet, derivatives could be combined as an SEO) and transactions between two counterparties or more (eg transactions from the undertakings of a given sector to undertaking of another sector such as for instance all credit protection insurances provided by insurance companies to credit institutions of the same financial conglomerate).