In my last blog I outlined the recent changes to the FR 2052a Complex Institution Liquidity Monitoring Report. Now I want to discuss the consolidations required for success.
The first challenge faced by institutions looking to comply with the new reporting requirements and thresholds is to determine which subsidiary institutions must be consolidated.
As required in the reporting rules published by the Federal Reserve, for purposes of reporting the consolidated entity, the firm should consolidate its subsidiaries on the same basis as U.S. Generally Accepted Accounting Principles (GAAP).
For purposes of this report, the consolidated entity will report all offices [e.g., branches, subsidiaries, affiliates, variable interest entities (VIEs), and international banking facilities (IBFs)] that are within the scope of the consolidated firm. Unless the instructions specifically state otherwise, this consolidation shall be on a line-by-line basis. As part of the consolidation process, the results of all transactions and all intracompany balances between offices, subsidiaries, and other entities included in the scope of the consolidated firm are to be eliminated and must be excluded from the consolidated report.
Furthermore, each material entity required to report will do so on a consolidated basis. Unless otherwise specified, each reporting entity should include all subsidiaries’ reportable exposures within its scope of consolidation. This process of consolidation may require certain transactions or positions to be classified differently at the level of the consolidated firm versus subsidiary reporting entities.
Generally, the “parent company” will be requested as a separate reporting entity and should be reported on a stand-alone basis, including only due-to and due-from exposures with subsidiaries and direct third-party exposures.
Download our guide to learn more about the FR 2052a report, including; history and recent changes, consolidation of subsidiary institutions requirement, data to be reported, reporting burdens and tools needed for reporting.