i) Article 325b CRR

Article 325b(4) CRR refers to the calculation of an own funds requirement at entity (institution or undertaking) level and then adding the amounts to get the result on a consolidated basis. Ordinarily (apart from banking vs trading book) when considering the consolidated basis, any transactions between entities that are part of the regulatory consolidation are excluded as they have been eliminated on consolidation.

Article 325b(4) CRR, however, refers to performing calculations (positions and own funds requirements) at an entity level and then aggregating the results. The calculation method has been further explained in Q&A 7194 in terms of basing it on the consolidated reporting entity’s currency, but there is no specific guidance on what can be included in the entity level calculations.

Where entities are all within the netting permission (per Article 325b(4), point (a), CRR), it would seem obvious enough that those transactions are excluded, as they would have no impact in any event; but otherwise (per Article 325b (4), point (b), CRR) the intragroup transactions are impactful if considering entity level.

However, where the entities are not within the netting permission it does matter whether intragroup transactions are allowed to be included. The example scenarios A) to C) (with numerical examples further below) illustrate the matter.

• Scenario A): No open positions with IG (intragroup transactions): Each entity in its own right has zero position but the consolidated view is different depending on whether IG transactions are included.
• Scenario B): Open positions with no intragroup transactions: each entity has open positions and there are no intragroup transactions. The entity level aggregation or consolidated view are the same.
• Scenario C): Closed positions with intragroup transactions: This takes scenario B) but eliminates the open position in each entity by executing intragroup transactions.

Thus the inclusion or not of intragroup transactions in the determination of the open position significantly impacts the outcome and indeed if included, then as per scenario C) they could obviate the need for netting permission in the first place.

ii) Article 352 CRR

As regards Article 352(2) CRR, the existing guidelines EBA/GL/2020/09 on structural FX, include some examples where at the consolidated level the investment in subsidiary ('Assets – participation') and related share capital of the subsidiary are eliminated. We presume this is not intended to be a special treatment of the investment and that other intragroup transactions would also be eliminated on consolidation.

If there is a different treatment of intragroup transactions in the two cases (Article 325b(4) CRR and Article 352(2) CRR), we would appreciate if the rationale could also be clarified.