Single Rulebook Q&A

Question ID: 2018_3762
Legal act : Regulation (EU) No 575/2013 (CRR) as amended
Topic : Other topics
Article: 4
Paragraph: 1
Subparagraph: 36
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
Article/Paragraph : -
Name of institution / submitter: European Central Bank
Country of incorporation / residence: Germany
Type of submitter: Competent authority
Subject matter : Definition of a qualifying holding
Question:
In order to identify a qualifying holding in an undertaking, for the purposes of the definition laid down in Article 4(1)(36) CRR, has the possibility to exercise a significant influence over the management of an undertaking to be accompanied, as a necessary precondition, by an even minimum level of holding in that undertaking (as suggested by the English or Italian language version of CRR)?
 
Or, conversely, can the definition of qualifying holding in Article 4(1)(36) CRR be met, in cases where the possibility for a person to exercise a significant influence in an undertaking is established, even in the absence of a minimum level of holding in the undertaking by that person?
Background on the question:
Article 4(1)(36) of the CRR (cross-referred by Article 3(1)(33) of the CRD IV) defines as follows: 'qualifying holding' means a direct or indirect holding in an undertaking which represents 10% or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking.
 
Besides the exceedance of the 10% threshold, a qualifying holding is also relevant, for the purposes of this definition, when a person has the possibility to exercise a significant influence over the target; it is however unclear whether, in order to be relevant for the purposes of the qualifying holdings definition, such possibility to exercise significant influence requires in any case that a direct or indirect holding be detained in the target.
 
The reference, in the English version of Article 4(1)(36) CRR, to “holding in an undertaking […] which makes it possible to exercise a significant influence over the management of that undertaking” would underpin the understanding that the possibility to exercise significant influence is only relevant, for the purposes of the CRR definition, when some (even minimum) level of holding in the undertaking is held; conversely, persons without any holding in the undertaking, but e.g. with contractual rights entailing significant influence over the undertaking, would not be included in the notion of qualifying holders resulting from Article 4(1)(36) CRR.
 
However, the definition of qualifying holding in some language versions of the CRR (e.g. German or French) is phrased in a way that may lead to the opposite understanding that having a holding is not a necessary precondition to meet this definition. Such discrepancy is reflected in the national legal system of some Member States, which apply the CRR as to treat an even minimum level of holding in an undertaking as a precondition to establish significant influence for the purposes of the qualifying holding framework, whereas the legal systems of other Member States allow the establishment of a significant influence in respect of persons without any holding in an undertaking. Since there should be a uniform definition and interpretation of qualifying holding, for the purposes of the CRR and of the CRD IV, we would seek for your view in this regard.
Date of submission: 13/03/2018
Published as Final Q&A: 03/05/2019
EBA answer:
The definition of ‘qualifying holding’ in Article 4(1)(36) of the CRR requires the existence of a direct or indirect holding that fulfils one of the two conditions specified in the definition. Namely such holding either 1) represents 10% or more of the capital or of the voting rights or 2) if it represents less it makes it possible to exercise a significant influence over the management.
 
Disclaimer:
 
This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Financial Stability, Financial services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.
Status: Final Q&A
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