- Question ID
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2015_2414
- Legal act
- Directive 2014/59/EU (BRRD)
- Topic
- Resolution financing arrangements
- Article
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103
- Paragraph
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7
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Delegated Regulation (EU) 2015/63 - DR on ex ante contributions to resolution financing arrangements
- Article/Paragraph
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5 (1) (f)
- Type of submitter
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Competent authority
- Subject matter
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Exclusions of liabilities matched by promotional loans
- Question
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According to Article 5 (1) (f) of Commission Delegated Regulation (EU) 2015/63, can exclusions of liabilities matched by promotional loans be greater than the sum of promotional loans themselves?
- Background on the question
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The asset side of promotional banks consists of either promotional loans in a narrow sense or other “auxiliary” promotional transactions which are defined by the respective laws. The specific law allows the respective promotional banks these auxiliary promotional transactions in accordance with the “Understanding about the orientation of legally independent special credit institutions in Germany” from 1st march 2002 (“Verständigung II”). Also the respective laws allowing the promotional banks the auxiliary promotional transactions have all been notified with the Commission in line with Verständigung II. The auxiliary promotional transactions are a necessary precondition for a promotional bank to be able to comply with its promotional duty and issue promotional loans in a narrow sense. In general the auxiliary promotional transactions enable promotional banks to comply with prudential requirements (LCR, risk diversification, capital ratio). They also generate earnings that subsidize the promotional loans and cover the administrative costs of the promotional business. In more detail the auxiliary promotional transactions of a promotional bank serve the following purposes (not every bullet applies to every bank) • generation of earnings to reduce interest rates to subsidize promotional business • liquidity management • risk management / risk diversification • coverage of administrative costs • compliance with prudential requirements (liquidity, capital) • generation of earnings to improve capital ratio In consequence all revenues from auxiliary promotional transaction go into the promotional cause. It does not seem possible to assign a specific purpose to a specific transaction since they generally serve several purposes (e.g. compliance with LCR requirements, risk management, generation of earnings to subsidize promotional business) These auxiliary promotional transactions vary from bank to bank but are predominantly securities with high quality such as: • sovereign bonds • blue-chip bonds • securitisations In general, bonds are held to the end of maturity and promotional banks, with one comparatively minor exception, have no trading book assets.
- Submission date
- Final publishing date
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- Final answer
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The term "matched" is to be interpreted in such a way that only 1 EUR of liabilities can be deducted for 1 EUR of promotional loans:
- Article 5 (1) (f) of the Delegated Act exempts certain liabilities from the calculation of the basic annual contribution. The scope of such exemptions is to be interpreted narrowly, not going beyond the objective of the exemption;
- The purpose of Article 5 (1) (f) of the Delegated Act is to favour certain liabilities resulting from promotional loans. The author of Article 5 (1) (f) of the Delegated Act did not intend to exempt all liabilities in connection with the activity of promotional loan business. This can be clearly deducted from the use of the terms "in so far as", which demonstrates that the author of the act was aware that institutions operating promotional loans might also have other operations generating different liabilities;
- In addition, the use of the term "matched" indicates symmetry between the promotional loan and the corresponding liability.
Disclaimer:
This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General 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
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Final Q&A
- Answer prepared by
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Answer prepared by the European Commission because it is a matter of interpretation of Union law.
- Note to Q&A
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Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Directive 2014/59/EU (BRRD) and continues to be relevant.
Disclaimer
The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.