ATTRIBUTES AND REQUIREMENTS | ANACREDIT

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ATTRIBUTES

AnaCredit foresees that the institutions report a set of attributes referring to three different groups:

  • Attributes of debtors
  • Attributes of creditors
  • Attributes of the credit agreement

 

REQUIREMENTS
The most important requirement in AnaCredit for the obligation of disclosure to exist is a minimum value of € 25,000 of any instrument.

With more than 100 attributes ranging from credit data, including the type of collateral, origin or maturity, most of these are related to data that had never before been requested from the institutions for reporting purposes, grouped into different data sets:

  • Counterparty reference data
  • Instrument data
  • Financial data
  • Data on the counterparty-instrument combination
  • Data on joint and several liability
  • Accounting data
  • Protection received data
  • Data related to instrument-received protection combination
  • Counterparty risk data
  • Data relating to counterparty default

BACKGROUND – ANACREDIT

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Since 2014 the European Central Bank (ECB) has developed a set of supervisory measures within the Eurosystem and the European System of Central Banks (ESCB) – introducing the Single Supervisory Mechanism – with the aim of collecting data granular credit.

On the basis of Council Regulation (EC) No 2533/98 of 23 November 1988, the ECB initiated in 2011 a new project to collect in detail all data on bank loans in the euro area. This new project, AnaCredit (Analytical Credit Datasets), as the name implies, intends to aggregate the set of analytical data related to credit at the individual level.

In 2015, the first draft of the new regulations provided the scope, statistical requirements and disclosure obligations, among others, of AnaCredit. With a tight schedule, it is necessary to disseminate information monthly, quarterly or, in some cases, AnaCredit alone can become a major challenge to the need for compliance by credit institutions and financial institutions in the Member States.

 

WHAT IS CRS?

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Economic and financial globalization made it easier for taxpayers to set up and manage investments through financial institutions outside their country of residence, making tax evasion easier, with large sums of money to be held offshore, which can not be taxed in the taxpayer’s home country, resulting in high costs for both financial institutions and governments themselves.

In order to have a more rigorous control of all these transactions, and since the implementation of FATCA in 2010, we have witnessed an increase in the automatic exchange of information between the various financial institutions.

Thus, in 2013, the OECD proposed a new mechanism that would allow a large increase in reported requirements and financial reporting. The Common Reporting Standard (CRS) arises, therefore, from the need for OECD governments to be able to exchange financial data that their institutions hold in relation to potential suspicions of accounts / holders.

To make this mechanism more efficient, there was a need to standardize the information to be reported by financial institutions. Thus, the quality of the information and the ease of access to it by the interested parties is guaranteed.

In order to ensure that this mechanism is as comprehensive as possible, CRS is set to reach three dimensions:

  • Financial information to be reported: different types of investments are taken into account (for example: interest, dividends, insurance, financial assets) as well as situations that lead to the belief that the taxpayer is trying to hide part of his capital so that do not be taxed;
  • Account holders subject to be reported: in addition to individual entities, CRS intends to reach companies that can serve as a front for these entities, in order to prevent taxpayers from concealing part of their income;
  • Financial institutions subject to be reported: in addition to the banks, the CRS covers a wide range of financial institutions that pass through brokers, insurance companies and collective investment vehicles;

FATCA AND PORTUGAL

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The Portuguese Republic and the United States of America signed a bilateral agreement (published in Diário da República, Notice no. 101/2016), in which they intend to implement the Foreign Account Tax Compliance Act (FATCA) in Portugal. enforced in August 2016. The objective is to ensure compliance with and implementation of international fiscal rules. The most diverse financial institutions in Portugal now have to identify all clients, who are considered US persons, and send the information on the accounts held by them to the Tax and Customs Authority.

The Inter Governmental Agreement (IGA) between Portugal and the US provides for the exchange of information between both parties, and Portugal also has the right to receive information on accounts held by Portuguese taxpayers in US financial institutions.

WHEN TO REPORT THE INFORMATION?

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The FATCA came into force on July 1, 2014, but its implementation was made gradually. In this sense, the first report of the US Accounts and Recalcitrant Accounts was made up to March 31, 2015 (referring to the year 2014) and should contain the following information: name, address, TIN, number and account balance of the US Persons (or, if the account has been closed after the entry into force of the FFI agreement, the amount withdrawn or transferred therefrom); the name, number and account balance of the Passive NFFEs with substantial US owners, as well as the name, address and TIN of each of the substantial US owners; the amount and aggregate number of recalcitrand accounts.

The second report, referring to the year 2015, should have been made until March 31, 2016. In addition to the information above, the second report should include the gross amount of interest, dividends and other income credited to each US account, except for gross proceeds. Information on the latter should be included in the third report.

Payments of non-US origin paid to nonparticipating foreign financial entities should only be made in 2016 and 2017, by reference to the years, until March 15.

Finally, US FDAP (US source fixed, determinable, annual, periodical payments) paid to recalcitrant accounts and non-participating FFIS (foreign financial entities) and their withheld tax, began to be reported in 2015, and by March 15, for reference to the previous year, whereas the US gross proceeds and their withholding tax will only have to be reported from 2018, by reference to 2017, since it is only this year that the withholding tax on these income begins.

WHAT INFORMATION SHOULD BE REPORTED?

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Foreign financial entities affected by the FATCA shall periodically report to the American IRS information regarding:

  • US Accounts (accounts opened in the name or on behalf of one or more US Persons or by a foreign company owned by US Persons);
  • Recalcitrant Accounts (account holders or beneficial owners whose recognition as US Person is not possible);
  • Payments subject to tax withholdings made to Recalcitrant Accounts and non-participating foreign financial entities.

Portugal is subject to Model 1 of the Intergovernmental Agreement, so financial institutions will have to send to the Tax Authority the necessary information on the US Persons accounts, required by the FATCA, in XML format.

BASEL III AGREEMENT

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The international financial crisis has exposed the weaknesses of the regulatory system of financial markets and demonstrated inefficiencies in risk management procedures in the financial sector. In this context, the Basel Committee on Banking Supervision (BCBS) has defined the new rules, known as Basel III, in order to improve the ‘rules of definition of global capital and liquidity to increase the stability of the sector’.

Basel III is based on three pillars defined in the Basle II agreement and adjusts the agreement to the current challenging reality of the financial markets, namely:

  • A more rigorous definition of capital in order to ensure a greater quantity, quality, transparency and coherence of the capital base;
  • The introduction of new capital buffers (Capital Conservation Buffer and Countercyclical Capital Buffer);
  • The strengthening of risk coverage, including counterparty credit risk (CCR Counterparty Credit Risk);
  • Leverage ratio implementation, in order to complement the Basel II framework, based on risk;
  • The implementation of new short- and long-term liquidity ratios (LCR Liquidity Coverage Ratio and NSFR Net Stable Funding Ratio);
  • The introduction of the concept of systemically important institutions (Systemically Important Financial Institution).

CAPITAL REQUIREMENTS REGULATION AND CAPITAL REQUIREMENTS DIRECTIVE

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The CRR Capital Requirements Regulation and the CRD Capital Requirement Directive constitute the European transposition of Basel III: the legal basis approved by the European Parliament and the Council of the European Union, which defines a set of prudential requirements for credit institutions and investment firms. Regulation applies from 1 January 2014, but a transition period is anticipated, until the year 2019. During this period the new requirements will be phased in.

STANDARDIZATION OF REPORTS – COREP / FINREP

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With the standardization of regulation, there was also a need to implement reports with uniform requirements and definitions through the Common Reporting Guidelines (COREP), a defined model for reporting information of a prudential nature, and Financial Reporting (FINREP), a model defined for reporting financial and accounting information.

WHO IS AFFECTED BY FATCA?

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FATCA applies to all foreign financial and non-financial operating entities. This means that FATCA has an impact on all non-US entities receiving payments from the US source, directly or indirectly.

Also, US entities, financial or non-financial, that make payments to foreign entities, are subject to the new FATCA rules, and must therefore make a formal commitment to the IRS, maintain documentation about these foreign entities and determine their classification within the framework of FATCA.