Voting control rule

In the financial reporting of a bank and of a company in general, all entities that are dependent on the reporting company as a result of voting rights must be included (voting control rule). – The introduction of this characteristic alone for the consolidation requirement meant that banks only mentioned their special purpose entities in off-balance sheet transactions until the subprime crisis in 2007. This is because the originating bank (originator) rarely held voting rights, and certainly not a majority of voting rights. For this reason, there was no need to report conduit risks on the balance sheet, even if the originator had granted the special purpose vehicle credit quality enhancing facilities in the form of irrevocable loan commitments. – See activity-shifting, on-balance-sheet, consolidation, nothing, on-balance-sheet, voting-rights disclosure.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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