Question ID
2022_6635
Legal act
Regulation (EU) No 2019/2033 (IFR)
Topic
K-factor requirements
Article
12
Paragraph
1
Subparagraph
h
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
-
Name of institution / submitter
Bank of Lithuania
Country of incorporation / residence
Lithuania
Type of submitter
Competent authority
Subject matter
Definition of off-balance sheet assets under IFR
Question

Should the assets which an investment firm safeguards and administers for clients (ASA) and assets under management (AUM) be included in the off-balance sheet total of an investment firm for the purpose of calculation of 100 million euro threshold set out in Article 12(1) h of IFR?

Background on the question

An investment firm safeguards and administers clients’ assets, as it is understood in accordance with Article 4(1) 29 of IFR, and manages assets under management in accordance with Article 4(1) 27 of IFR. Those assets do not appear on the investment firm’s own balance sheet and are in third‐party accounts.

 

Recital 17 of the IFR refers to off-balance sheet item when specifying calculation of thresholds for the investment firms to be considered as small and non-interconnected under Article 12(1) h of IFR. The definition of off-balance sheet item, as provided in article 4(1) 41 of the IFR, includes items referred to in Annex I to Regulation (EU) No 575/2013. Meanwhile Article 12(1) h refers to on‐ and off‐balance‐sheet total of the investment firm. Therefore, there is technical error regarding the term in either recital or Article 12 (1) h of IFR.

 

The definition is also relevant for Article 32(4) a together with Article 28(4) and Article 33(1) of IFD which requires an investment firm to establish a remuneration committee and risk committee if value of its on and off‐balance sheet assets on average is EUR 100 million over the four‐year period immediately preceding the given financial year. The definition is also relevant for Article 52(1) of IFR in terms of the disclosures of investment policies.

 

Neither IFD, nor IFR do not provide definition of the term off-balance sheet total or off-balance sheet assets.

 

Accordingly, the question arises whether asset safeguarded and administrated (ASA) and asset under management (AUM) shall be included in off-balance sheet total or off-balance sheet assets of an investment firm for the purpose of threshold calculation under Article 12(1) h of IFR and Article 32(4) a, Article 28(4) of IFD and Article 52(1) of IFR?

Submission date
Rejected publishing date
Rationale for rejection

This question has been rejected because it is considered that EBA guidance or clarification is not needed with regard to the issue that it raises. The definition of on- and off-balance sheet items must refer to the applicable accounting framework and does not depend on the IFR/IFD framework. As regards the definition of small and non-interconnected investment firms, criteria are set in the IFR and all have to be met regardless of the applicable accounting framework. 

The Single Rule Book Q&A tool has been established to provide explanations and non-binding interpretations on questions relating to the practical application or implementation of the provisions of legislative acts referred to in Article 1(2) of the EBA’s founding Regulation, as well as associated delegated and implementing acts, and guidelines and recommendations, adopted under these legislative acts.

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Status
Rejected question