The EBA agrees with the proposed requirement, as the criteria are consistent with the IASB Framework and will result in a net position being presented only when there is, in effect, a single asset or liability. These criteria are based on the existing requirements for offsetting financial assets and financial liabilities currently applied under IAS 32, which, in EBA's view, did not raise any concerns inthe past. The EBA believes that they result in a faithful representation of the entity’s expected cash flows.

The EBA agrees with the requirement that the right of set-off must be unconditional and enforceable in all circumstances. In that respect the EBA agrees with the boards that the presentation of the statement of financial position should not exclusively be aimed at conveying only an entity’s exposure to credit risk.

The EBA agrees that offsetting should be permitted for multilateral as well as bilateral arrangements, provided that the criteria are met.

The EBA agrees with the proposed disclosure requirements as they are an important factor ensuring that users of financial statements can make well-informed decisions, and compare across entities.

The EBA agrees with the proposal to apply the requirements retrospectively which should enhance comparability across time periods and entities.

Full paper