Would such a frame given in advance to reduce own funds for a certain predetermined amount for market making purposes result in a deduction from own funds at the time when permission is given or would a deduction from own funds be made at the time when the actual repurchase of capital instruments takes place? It should be noted that the question being posed is linked to the situation where a permission is given in advance to repurchase own capital instrument for market making purposes. The question being posed is not linked to a situation where a permission is given in advance to repurchase own capital instrument in order to reduce own funds on a permanently basis.
It follows from Article 28, paragraph 2, that “where redemptions, reductions and repurchases are expected to take place with sufficient certainty, and once the prior permission of the competent authority has been obtained, the institution shall deduct the corresponding amounts to be redeemed, reduced or repurchased from corresponding elements of its own funds before the effective redemptions, reductions or repurchases occur. Sufficient certainty is deemed to exist in particular when the institution has publicly announced its intention to redeem, reduce or repurchase an own funds instrument.” In our view a frame given in advance to reduce own funds for a certain predetermined amount for market making purposes would not lead to a deduction in own funds as this situation is a very different from a situation where the institution has publicly announced its intention to repurchase own funds instruments which would have a permanently impact on the institutions own funds. Moreover in our view a frame given in advance to reduce own funds for a certain predetermined amount for market making purposes is not to be considered an actual or contingent obligation to purchase own funds instruments by virtue of an existing contractual obligation and would not be covered by CRR, Article 36, paragraph 1 (f)).
The predetermined amount for which the competent authority has given its permission under Article 29(3) of Regulation (EU) 241/2014 should (RTS for Own Funds requirements for institutions) be deducted from the moment the authorisation is granted, pursuant to Article 28(2) of that Regulation, as sufficient certainty about the repurchase is deemed to exist from that moment.
Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.