Question ID:
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Large exposures
395, 400, 403
(1), (2)c
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Disclose name of institution / entity:
Name of institution / submitter:
Magyar Nemzeti Bank (Central Bank of Hungary)
Country of incorporation / residence:
Type of submitter:
Competent authority
Subject Matter:
Exemptions from the application of Article 395(1)

Could exposures of an institution fully guaranteed by its parent undertaking - considering the substitution approach under Article 403(1)(a) of Regulation (EU) No 575/2013 (CRR) – be exempted from the large exposures provisions and in this way from the application of Article 395(1)? Furthermore, may the guarantees provided by the parent institutions from another Member State be handled in Article 403 of the CRR as a third party guarantee?

Background on the question:

According to the Article 400(2)(c) of Regulation (EU) No 575/2013, competent authorities may fully or partially exempt from the application of Article 395(1) exposures, including participations or other kinds of holdings, incurred by an institution to its parent undertaking, to other subsidiaries of that parent undertaking or to its own subsidiaries, in so far as those undertakings are covered by the supervision on a consolidated basis to which the institution itself is subject, in accordance with this Regulation, Directive 2002/87/EC or with equivalent standards in force in a third country; exposures that do not meet these criteria, whether or not exempted from Article 395(1) of this Regulation, shall be treated as exposures to a third party. According to the Hungarian Banking Law, exposures defined in Article 400 (2)(c) of the CRR are exempted from large exposure requirements.

However, an institution plans to provide a loan to a company, where the loan is fully guaranteed by the parent bank of the institution. The institution would like to use the substitution approach defined by Article 403, and to handle the loan as an exposure to its parent bank. If it is possible, the loan could be exempted from the large exposure requirements. It is worth mentioning that the parent bank is situated in another Member State, which may be a relevant issue, because Article 113(6) of the CRR also makes a differentiation between parent undertakings in the same Member State and outside. The CRR does not give a definition of “third party”. Clarification should be given if parent undertakings from another Member State could be handled as third parties in the application of Article 403.

Date of submission:
Published as Final Q&A:
Final Answer:

Exposures to a client that are guaranteed by the institution's parent undertaking could should be treated as exposures incurred to the guarantor, i.e. the parent undertaking, rather than to the client, under the conditions set out in Article 403 of Regulation (EU) No 575/2013 (CRR). If the exemption under Article 400(2)(c) CRR applies, the exposures incurred to the parent undertaking would be exempted from the application of Article 395(1) CRR on limits to large exposures.

The guarantee provided by the parent undertaking would should be considered an exposure of the parent undertaking to the client and subject to the application of the large exposures regime, including Article 395(1) CRR.  

Final Q&A
Answer prepared by:
Answer prepared by the EBA.
Note to Q&A:

Update 16.09.2021: 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.