Single Rulebook Q&A

Question ID: 2018_3924
Legal act : Regulation (EU) No 575/2013 (CRR) as amended
Topic : Accounting and auditing
Article: 473a
Paragraph: 9
Subparagraph:
Article/Paragraph : Art.473a(9) of Reg. (EU)2017/2395 amending Reg. (EU)575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
Type of submitter: Competent authority
Subject matter : IFRS 9 Transitional arrangements – Reversal of the decision to apply the transitional arrangement
Question:

What should be understood as reversal of the initial decision and, as such, be subject to the prior permission of the competent authority? Which are the possible scenarios?

Background on the question:

Some concrete examples are:

- Initial decision: no application of transitional arrangements / reversal of the initial decision: application of static and dynamic approach;

- Initial decision: no application of transitional arrangements / reversal of the initial decision: application of static approach;

- Initial decision: application of static and dynamic approach / reversal of the initial decision: apply only static approach;

- Initial decision: application of static and dynamic approach / reversal of the initial decision: no application of transitional arrangements;

- Initial decision: application of static approach / reversal of the initial decision: apply also the dynamic approach;

- Initial decision: application of static approach / reversal of the initial decision: no application of transitional arrangements.

Date of submission: 23/05/2018
Published as Final Q&A: 25/05/2018
EBA answer:

Article 473a(1) of the CRR introduces an option for institutions to apply the transitional arrangements. According to the first subparagraph of Article 473a(9) of the CRR, the institution shall inform the competent authority (CA) of its initial decision regarding the application of transitional arrangements by 1 February 2018. The institution, however, may reverse the initial decision to apply or not apply the transitional arrangements once during the transitional period, subject to prior permission of the CA.

Further, the second subparagraph of Article 473a(9) sets out an option for institutions that decided to apply the transitional arrangements not to apply Article 473a(4) of CRR (i.e. the dynamic component). In that case, the CA shall also be informed by the institution by 1 February 2018. Similar to the decision on whether to apply or not the transitional arrangements, the decision on whether to apply or not to apply the dynamic component may be reversed once during the transitional period, subject to prior permission of the CA.

In line with Recital 6 of Regulation (EU) 2017/2395, the reversal of the initial decision is allowed subject to the prior permission of the relevant CA, which should ensure that such decision is not motivated by considerations of regulatory arbitrage. 

The legal text is neutral between use or non-use of the transitional arrangements. For that reason a ‘subsequent’ (meaning reversal of an initial) decision taken after 1 February 2018 not to use them would as much require the permission of the CA as a  subsequent decision taken after 1 February 2018 to apply them.

Status: Final Q&A
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