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List of Q&A's

Prudential consolidation: definition of "undertaking" and "dominant influence"

For the purpose of the application of CRR Article 18(1) and CRR Article 18(8) could you clarify whether:- the term “undertaking” means necessarily “entity” having a legal personality;- the term “dominant influence” has to be understood in a broader sense than within the meaning of the Article 1(1) of the Directive 83/349/EEC;

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4716
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Leverage ratio methodology - Art. 429(6) and (7) of Reg.(EU) No 575/2013 and Art. 429 a) of the Del. Reg. 2015/62 - art. 5 par. 3 of Comm. Deleg. Regulation (EU) 2015/63

To fill in some parts of the SRF 2018 Ex ante contributions Reporting forms in line with the Commission Delegated Regulation (EU) 2015/63, in particular the section related to “Derivative adjustment” (Art. 5 par 3), institutions must apply the “leverage ratio methodology” as defined in art. 429 of regulation 575 (CRR) to derivatives recognized in accordance with Article 295, where the current market value of the derivatives is negative. Are the variation margins paid in cash to the counterparty (a receivable asset) deductible from the net negative current market value (liability) of derivatives, based on the instructions contained in par. 3 of Article 429 a) of the delegated regulation 2015/62?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/63 - DR on ex ante contributions to resolution financing arrangements
  • ID: 2018_3732
  • Topic: Resolution financing arrangements
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Scope of Prudential consolidation

Which is the applicability of Article 22 CRR for successive subsidiaries of a Significant Institution (SI) in the SSM and rest of EU, when the subsidiary in a third country as referred in Article 22 CRR is held by the subsidiary in the SSM or rest of the EU that is the last in the chain of the successive subsidiaries of the SI?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4711
  • Topic: Other issues
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Clarification regarding the consideration in Article 42(6)

Can you please clarify Article 42(6) of Directive 2014/59/EU (BRRD); regarding that the consideration can have a nominal or negative value? Does effect of this mean that the asset management vehicle (AMV) must owe a debt to the institution under resolution?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2018_3698
  • Topic: Resolution tools and powers
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Application of disclosure templates in EBA/GL/2018/10 for O-SIIs

Does the operation of paragraphs 17, 18 and 19 of EBA/GL/2018/10 mean that the 2018 NPL Guidelines apply to all O-SIIs, even if they are not credit institutions? If so, how is this reconciled with paragraph 6 of EBA/GL/2018/10, which states that the 2018 NPL Guidelines apply to credit institutions?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2016/11 - Guidelines on disclosure requirements under Part Eight of CRR
  • ID: 2019_4683
  • Topic: Transparency and Pillar 3
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Potential inconsistency between articles 68 and articles 69 through 71 in what concerns exemptions.

Considering contracts involving central counterparties and central banks are exempted from Member States' powers (i) "to suspend certain obligations" (69), (ii) "to restrict the enforcement of security interests" (70) and (iii) "to temporarily suspend termination rights" (71), are such organizations exempted from the "exclusion of certain contractual terms in early intervention and resolution" (68)? Example: if a crisis prevention measure is taken in relation to an entity with which a central counterparty or a central bank has a bilateral agreement, would the central counterparty or central bank be able to immediately exercise its contractual termination rights on the grounds of the referred intervention?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2017_3421
  • Topic: Resolution tools and powers
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Annual contributions of institutions – which data should constitute the basis for the calculation of annual contributions to resolution financing arrangements in case of a significant change of the risk profile of an institution

In case of a significant change of the size and risk profile of an institution (in particular as a result of an M&A transaction), which data should constitute the basis for the calculation of the annual contributions to the resolution financing arrangements: (i) data derived from the most recently approved annual financial statements available prior to 31 December of the year preceding the contribution period (i.e. data which effectively precedes the contribution period by two years, e.g. for 2017, the resolution authority would rely on data as of 31 December 2015); or (ii) more recent data that adequately corresponds to the actual size and risk profile of the institution?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/63 - DR on ex ante contributions to resolution financing arrangements
  • ID: 2017_3322
  • Topic: Resolution financing arrangements
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Specialised Lending - Interpretation of contractual arrangements that give the lender a substantial degree of control

How shall Article 147 (8)(b) CRR be interpreted when identifying ‘contractual arrangements that give the lender a substantial degree of control over the assets and the income that they generate’ in the context of real estate financing?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2019_4672
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Applicability of Directive 2001/24/EC by virtue of Article 117 para 1 subpara 4 of Directive 2014/59/EU

Whether Article 117 para 1 subpara 4 of Directive 2014/59/EU has amended Article 1 Directive 2001/24/EC with the effect that Directive 2001/24/EC is applicable to a Union branch (branch located in a Member State of a third-country institution) that was subject to resolution measures under Directive 2014/59/EU.

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2017_3123
  • Topic: Cross-border resolution
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Recapitalization

Are capital increases of a subsidiary meeting the conditions for early intervention by the mother company covered by the BRRD provisions on intragroup financial support?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2016_3042
  • Topic: Intra-group financial support
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Deposits covered by third country deposit guarantee schemes

Are "covered deposits" as defined in Article 2(1)(94) of Directive 2014/59/EU (BRRD) only deposits covered by EEA Deposit Guarantee Schemes?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2016_3029
  • Topic: Resolution tools and powers
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Liability already accrued

What does “Liability already accrued” in Article 60(2)(b) refer to?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2016_3020
  • Topic: Write-down and conversion of capital instruments
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Application of the risk indicators in specific cases - Liquidity sub-group

How to apply waivers granted by NCA in accordance articles 8 and 21 of CRR (liqiudity requirements / liquidity sub-group) with regard to NSFR when calculating ex ante contributions to resolution financing arrangements for particular firms?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/63 - DR on ex ante contributions to resolution financing arrangements
  • ID: 2016_2975
  • Topic: Resolution financing arrangements
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Determination of the recapitalisation amount of MREL (in the RTS on MREL)

The RTS says (article 2, paragraph 6,7,8): "6. The capital requirements referred to in paragraph 5 shall include the following: (a) own funds requirements pursuant to Articles 92 and 458 of Regulation (EU) No 575/2013, which include: (i) a CET1 capital ratio of 4.5% of the total risk exposure amount; (ii) a Tier 1 capital ratio of 6% of the total risk exposure amount; (iii) a total capital ratio of 8% of the total risk exposure amount; (b) any requirement to hold own funds in excess of the requirement listed in point (a) of this paragraph , in particular pursuant to point (a) of Article 104(1) of Directive 2013/36/EU; (c) the Basel I floor according to Article 500 of Regulation (EU) No 575/2013; (d) any applicable leverage ratio requirement. 7. The recapitalisation amount shall also include any additional amount that the resolution authority considers necessary to maintain sufficient market confidence after resolution. 8. The default additional amount shall be equal to the combined buffer requirement, as specified in Chapter 4, Section 1 of Directive 2013/36/EU which would apply to the institution after the application of resolution tools." These paragraphs are not entirely clear on how the market confidence buffer should be articulated with the components of 6.(a),(b),(c) and (d). In particular, if a bank’s Basel 1 floor (or leverage ratio) requirement is higher than the sum of 6(a)+(b), and if a market confidence buffer (say the combined buffer) is required by the Resolution Authority, is the recapitalisation amount equal to the sum of the Basel 1 floor/Leverage requirement AND the combined buffer requirement? Or is the recapitalization amount equal to the higher of I)the sum of requirements (6a+6b) and the combined buffer and ii)the Basel 1 floor or leverage requirement?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2016_2932
  • Topic: MREL
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Calculation of “total liabilities including own funds”

How shall authorities calculate “total liabilities including own funds”?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2016_2914
  • Topic: MREL
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

General principles governing resolution

BRRD Article 34.1.b. states that "creditors of the institution under resolution bear losses after the shareholders in accordance with the order of priority of their claims under normal insolvency proceedings, save as expressly provided otherwise in this Directive". I have two questions : Does the fact that "creditors of the institution under resolution bear losses [...] accordance with the order of priority of their claims under normal insolvency proceedings save as expressly provided otherwise in this Directive" means that creditors with the same ranking under insolvency be treated the same way under the bail-in, bridge bank or sale of business tools except if the BRRD explicitely excludes one specific liability from the application of the considered resolution tool or does the provision "save as expressly provided otherwise in this Directive" means that if the BRRD allows for a transfer / bail-in of "all or any liabilities" then similar liabilities can be treated differently ? Does the principle according to which "creditors of the institution under resolution bear losses after the shareholders" also applies to a bridge bank created under BRRD rules and to which further resolution tools, including possibly bail-in, are applied or does that apply only to the "initial" institution or until the bridge bank is not a bridge bank anymore ?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2016_2728
  • Topic: Resolution tools and powers
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Use of deposit guarantee scheme

Should Article 109 (1) (b) BRRD be read without the part "in proportion to the losses suffered by creditors with the same level of priority under the national law governing normal insolvency proceedings" in case there are no creditors sharing the priority rank with DGS in national law? If so, does this mean that if any tool other than the bail-in tool is applied, DGS must, in such case, always cover the amount up to the amount of losses it would have had to bear had the institution been wound up under normal insolvency proceedings without the need that other creditors (e.g. eligible depositors) cover such losses before DGS does?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2016_2707
  • Topic: Resolution financing arrangements
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Governing Law of the Instruments under Article 66.4.(a) of the BRRD

What governing law is meant by the reference to the governing law of a capital instrument under Article 66.4 (a) of the BRRD? Should the governing law of the capital instrument be the law governing law of the liability (obligations) arising under such instrument or the law applicable to the proprietary (rights in rem; ownership) issues with respect to the relevant instrument or the law of the issuer of such instrument or any other law?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2016_2704
  • Topic: Resolution tools and powers
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

bail in of interbank deposits with original maturity of less than seven days

Could you please clarify if a 6 day deposit that has been rolled over multiple times could be considered to be of greater maturity than 6 days in the event of a bail in? In other words if there is a clause that stipulates the number of times a 6 day deposit can be rolled over before losing its status as a 6 day deposit and therefore losing its protection from a bail in?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2016_2688
  • Topic: Write-down and conversion of capital instruments
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Contractual recognition of bail-in

Does Article 55 BRRD apply also to agreements (such as guarantees or counter-guarantees) that create contingent liabilities, which, as such, are not subject to bail-in unless and until the contingency occurs?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2016_2669
  • Topic: Other topics
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022