COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
N.A.
Type of submitter
Resolution authority
Subject matter
Implementation of this article for subsidiaries that do not belong to the same resolution group as the EU parent institution.
Question
1. Is it possible to adopt a reading of Article 72e(4) CRR that would allow the application of the formula to subsidiaries established in third countries that are not included in a resolution group of the parent institution in line with point (83b)(iii) of Article 2(1) of Directive 2014/59/EU (“BRRD”)?
2. If the answer to Question 1 is yes, what conditions should be met for the exercise of discretion by the resolution authority of the parent institution with respect to allowing the parent institution to deduct an adjusted amount subject to the floor provided by the formula? In particular, how should the variables “r(i)”, “aRWA(i)”, “LP(i)”, and “OP(i)” in the formula in Article 72e(4) CRR be understood, given that they refer to formal terms and concepts that are defined by European law?
Background on the question
Article 72e(4) CRR provides an exception to the general deduction regime applicable to all G-SII entities for the specific case of parent institutions of G-SII groups with multiple resolution entities (“MPE group”). However, the definition of “resolution entity” in Article 2 (83a) BRRD refers to a person established in the Union. While the definition of “resolution group” in Article 2 (83b) BRRD provides flexibility with respect to the possibility of including subsidiaries in third countries in any resolution group, it would not be possible to identify resolution groups with resolution entities established outside the EU in the resolution plans for banking groups with parent entities established in the Union. As a consequence, the adjustment to the deduction amount for the parent institution of an MPE group could only be applied with respect to intragroup holdings of own funds instruments and eligible liabilities issued by subsidiaries that are included in resolution groups, for which the resolution entity is established in the EU. This would contradict the spirit of the TLAC Term Sheet developed by the Financial Stability Board (FSB), which allows the identification of resolution entities in all FSB member jurisdictions that adhere to the FSB principles.
Paragraph (4) of Art. 72e CRR seems to not allow adjustments of the deduction amount with respect to intragroup holdings of TLAC eligible instruments that are issued by subsidiaries which are subsidiaries of resolution entities established outside the EU.
