If an other systemically important institution (O-SII) is the subsidiary of either a global systemically important bank (G-SII) or of an O-SII which are established in another Country and the latter is subject to an O-SII capital buffer on a consolidated basis, can a national authority set a capital buffer for the O-SIIs at subsidiary level exceed 1% provided it remains below the rate of the capital buffer at group level and the 2% cap of Article 131(5)? Also, does Article 131(8)(a) CRD refer to 1% of the total risk exposure amount (TREA) of the subsidiary or of the group at consolidated level?
According to Article131(5) CRD the competent authority may require each O-SII, on a consolidated or sub-consolidated or individual basis, to maintain an O-SII buffer of up to 2 % of the total risk exposure amount (TREA) calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013. Article 131(8) CRD further states that, without prejudice to Article 133 and Article 131(5), where an O-SII is a subsidiary of either a G-SII or an O- SII which is an EU parent institution and subject to an O-SII buffer on a consolidated basis, the buffer that applies at individual or sub-consolidated level for the O-SII shall not exceed the higher of: (a) 1% of the total risk exposure amount calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013; and (b) the G-SII or O-SII buffer rate applicable to the group at consolidated level. It is unclear whether a subsidiary O-SII can be subject to an O-SII buffer that is higher than 1%. Furthermore, it is also unclear whether Article 131(8)(a) CRD refers to 1% of the TREA of either the subsidiary or the group, on a consolidated level.
Article 131(8) CRD also clarifies that the above levels of the buffer rates refer to the TREA that applies on an individual or sub-consolidated basis.
1% of its total risk exposure amount (TREA), provided it does not exceed the rate of the G-SII or O-SII capital buffer at group level. In detail, two different scenarios can be distinguished: 1) the group in Country A is subject to the requirements of a G-SII or O-SII buffer of 1% or lower and its O-SII subsidiary in Country B has also been designated as O-SII on a solo (or sub-consolidated) level. In this case the O-SII buffer requirement in Country B cannot be set higher than 1% of the TREA of the subsidiary in Country B, according to the conditions of Article 131(8);
Update 26.03.2021: This Q&A has been updated in the light of the changes introduced to Directive 2013/36/EU (CRD).