Transitional provisions on the introduction of IAS 19 revised

Which are the reporting dates that institutions should refer in the calculation of the applicable amount in accordance with 473 (2) of Regulation (EU) No 575/2013 (CRR)?

Article 473 of CRR establishes transitional provisions for a phased-in recognition for prudential purposes of the impact from the application of the revised IAS 19. As explained in the EBA DP on the impact on the volatility of own funds issued on the 17 February 2014, the amendment to IAS 19 which could have an impact on institutions’ own funds are the immediate recognition of actuarial gains and losses in the period in which they occur (elimination of corridor approach) and the immediate recognition of unvested past service cost. Under the requirements of Article 473, institutions shall add to their CET1 the difference between the net pension liability or asset, under the previous IAS 19 (included in “Regulation No 1126/2008 as amended by Regulation No 1205/2011”) and the revised IAS 19 (included in the current “Regulation No 1126/2008”) multiplied by a specific factor for each year respectively until 31 December 2018. This adjustment cannot be higher than the amount not required to be deducted from own funds prior to 1 January 2014, when national transposition measures are applied for the effect of the revised IAS 19. However, Article 473(2) is not clear about which reporting dates institutions should refer to when calculate the amount to be added to the CET1 capital. In particular, there are three possible interpretations: a) calculation of the difference between the net pension liability or asset under the previous IAS19 and the amended IAS19, at each reporting date (performing two calculations at each reporting date), or b) calculation of the difference between the net pension liability or asset as at 1st January 2013 and 31st December 2012 (which would give a constant difference to which the percentages of Article 473(3) apply), or c) calculation of the difference between all pension liability or asset as reported at 31st December 2012 under the previous IAS19 and all net pension liability or asset at the reporting date under the revised IAS19.