- Question ID
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2020_5461
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Liquidity risk
- Article
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411
- Paragraph
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1
- Subparagraph
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f
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
- Article/Paragraph
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28(1)
- Type of submitter
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Credit institution
- Subject matter
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Outflows from deposits in insurance wrappers
- Question
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Can cash deposits in insurance wrappers be treated like deposits by Personal Investment Companies (PIC) when computing outflows in the LCR?
- Background on the question
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For the purpose of this question, we define an ‘insurance wrapper’ as consisting in a life insurance policy in which an investment portfolio is dedicated to the exclusive investment of the insurance premiums of a private policyholder (i.e. a life insurance policy “wrapped” around an investment portfolio). The investment portfolio is controlled by a life insurance company, but segregated from other general assets of that life insurance company. The beneficiary of the life insurance policy is the ultimate beneficiary of the investment portfolio. The Bank acts as depositary bank for the life insurance company and opens clearly segregated accounts for each insurance policy. Cash deposits in these segregated accounts lead to considerations of outflows according to Article 22 of Commission Delegated Regulation (EU) 2015/61. Article 411 (1) of Regulation (EU) 575/2013 define “Financial customers” as including insurance undertakings. Article 3(10) of Commission Delegated Regulation (EU) 2015/61 defines a “Personal Investment company” as an “undertaking or a trust whose owner or beneficial owner, respectively, is a natural person or a group of closely related natural persons, which was set up with the sole purpose of managing the wealth of the owners and which does not carry out any other commercial, industrial or professional activity”. According to Article 28(1) of Commission Delegated Regulation (EU) 2015/61: “Credit institutions shall multiply liabilities resulting from deposits by clients that are non-financial customers, [...], personal investment companies or by clients that are deposit brokers, to the extent they do not fall under Article 27 by 40 %.” Deposits by an insurance wrapper could be interpreted as being either: - Deposits by an insurance undertaking - Deposits by a Personal Investment Company The interpretation has a material impact on the level playing field in the single EU banking, insurance and asset management markets.
- Submission date
- Final publishing date
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- Final answer
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Article 411(3) of Regulation (EU) No 575/2013 as amended (CRR) defines a personal investment company as an undertaking or a trust whose owner or beneficial owner, respectively, is a natural person or a group of closely related natural persons, which was set up with the sole purpose of managing the wealth of the owners and which does not carry out any other commercial, industrial or professional activity. In that regard, an insurance undertaking is not expected to meet this definition since it has usually been set up to provide a variety of services to different customers, thus not solely managing the investment portfolio of the ultimate beneficiary of the life insurance undertaking.
Against this background, deposits received from a life insurance company, including those where the investment portfolio of life insurance policies are materialised, even in segregated accounts, should be treated as deposits from financial customers, following Article 411(1)(f) CRR, and be subject to 100% outflow rate as per Article 31a(1) LCR DR.
- Status
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Final Q&A
- Answer prepared by
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Answer prepared by the EBA.
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.