Goodwill included in the valuation of significant investments

1. For the purposes of Article 37(b) CRR, are the significant investments of the institution limited to the significant investments in financial sector entities (FSE) or should they include all significant investments (i.e. also significant investments in entities that are not financial sector entities)? 2. Should Article 37(b) CRR be applied only when the significant investments outside the prudential perimeter are valued for prudential purposes using the equity method or should it be applied also when the significant investments are valued for prudential purposes at historical cost? 3. Should the amount to be deducted pursuant to Article 37(b) CRR be limited to goodwill or should it include also the other intangible assets included in the valuation of the significant investments of the institution?

1. Article 37(b) CRR does not specify whether significant investments should be limited to the significant investments in financial sector entities (FSE) or should they include all significant investments.. 2. Some institutions argue that when a significant investment outside the prudential perimeter of consolidation is valued for prudential purposes at historical cost, it is not possible to determine the amount of goodwill included in the valuation of the significant investment. 3. Article 37(b) CRR sets out the following: “Institutions shall determine the amount of intangible assets to be deducted in accordance with the following: … (b) the amount to be deducted shall include goodwill included in the valuation of significant investments of the institution. It is not specified if the provision should be limited to goodwill only or it can include other intangible assets. Those questions have been briefly discussed at the April 2018 SGOF meeting.