Transfer of banking business – presentation of transaction in FINREP movements tables

An application for approval of the legal merger of Bank A with Bank B has been submitted to the Central Bank of Cyprus. The legal merger will be completed in two steps, (i) the transfer of banking business of Bank B to Bank A via a transfer of business agreement, (ii) the merger of the two entities via a scheme of reorganisation. Following step (i) of the merger, Bank B will not maintain any activities or deposits and it will surrender its banking license. As such it will cease to be a credit institution and will temporarily obtain ~36% of Bank A through the transfer of business to Bank A (subject to regulatory approvals). The said legal merger is expected to be effective from 1 July 2025 onwards. The first FINREP report that will be prepared for the “merged” entity will be for reference date 30/09/2025. Given the transaction described above, how should we approach the FINREP tables that show movements (i.e. tables F12.01, F12.02, F18.01, F24.01, F24.02, F25.01& F 25.03)? In our view, the possible options are as follows: (i) Opening balances comprise of the sum of the opening balances of both entities (prior to the transaction) as at 01/01/2025. Additions/disposals/other movements during the reference period are again the sum of the additions/disposals/other movements of the two entities. As such the transfer of balances from Bank B to Bank A will not be explicitly shown. (ii) Amounts transferred from Bank B to Bank A form part of the inflows/additions of the “merged” entity, meaning the opening balances on the movements tables present the figures as presented by Bank A in its current reporting.  (iii) Opening balances will be shown as nil and all will be shown as “Inflows”, as if a new entity is set up.

Article 8 paragraph 2 of Regulation (EU) 2015/534 states that “Information referring to a period shall be reported cumulatively from the first day of the calendar year to the reference date.”. Following this, opening balances of each calendar year agree to the closing balances of the previous calendar year, remaining the same throughout the calendar year. Changes in the closing balances, as well as movements (e.g. inflows, outflows, changed etc.) only concern transactions occurred during the reference year.