Which entities should be included in a household?

A household, in the context of banking and finance, typically refers to a group of entities that are financially interrelated or collectively evaluated for exposure and risk management. When defining what constitutes a household, it is important to include all entities that form a cohesive financial grouping based on exposures, relationships, and shared resources.

Including all entities forming a group for exposure means that any relevant financial relationships, whether they are individual accounts, joint accounts, business accounts associated with the individuals, or other financial interests, should be considered. This comprehensive approach allows banks to gain a holistic view of the financial situation, creditworthiness, and risk profile of the household as a whole.

In this scenario, focusing solely on businesses associated with a customer would neglect individual contacts and other relevant entities that may impact financial exposure. Similarly, only considering individual contacts would overlook the collective financial picture presented by related entities, while considering entities with different financial goals may lead to fragmentation of analysis rather than a unified view necessary for effective financial decision-making. By recognizing all entities that collectively form a household, financial institutions can better assess relationships and manage risk effectively.