May a credit institution exclude exposures from large exposure calculations which are fully covered by own funds (i.e. full deduction of own funds for this large exposure amount) and which are not used otherwise (e.g. for minimum capital requirements)?
I am seeking clarification for a technical question as regards large exposure for credit institutions within the EU. Part 4 (Article 387 ff.) of Regulation (EU) No 575/2013 (CRR) describes the respective legislative requirements for large exposures. According to Art. 390, No. 6(e), exposures deducted from own funds shall not be included in the large exposure calculation. We understand that the CRR, part 4, Art. 390, No. 6(e) only refers to deductions from own funds in accordance with Articles 36, 56 and 66 of the CRR, i.e. voluntary deductions are not explicitly covered. Even though Part 4 of the CRR does not contain the same wording as laid down in Article 106, No.1, Para.3 of 2006/48/E (former Capital Requirement Directive) in respect of exemption from large exposure calculation if such exposures are fully covered by own funds, we may ask you whether the former rules may also be applied under the new CRR, i.e. voluntary full deduction of exposures from own funds would also lead, assuming these own funds are not used for any purposes other than this, to the result that such exposures are not taken into consideration anymore for large exposure calculations. I would like to confirm with you that a credit institution may be allowed to exclude exposures from large exposure calculations which are fully covered by own funds and that those funds are not used for any purposes other than this. From a micro-economical perspective, this would seem to be a fully reasonable approach.
Exposures deducted from own funds in accordance with Articles 36, 56 and 66 of Regulation (EU) No 5752013 (CRR) are excluded from the large exposure calculations in accordance with point (e) of Article 390(6) of that Regulation.
Exposures which do not correspond to one of the items listed in Articles 36, 56 or 66 of that Regulation while being deducted from own funds cannot be excluded from the large exposure calculations pursuant to Article 390(6) of that Regulation.
This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Internal Market and Services) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.
Update 26.03.2021: This Q&A has not yet been reviewed by the European Commission in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).