Question ID
2016_2718
Legal act
Directive 2014/59/EU (BRRD)
Topic
Intra-group financial support
Article
19
Paragraph
3
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
n.a.
Type of submitter
Competent authority
Subject matter
Providing IGFS pursuant to Article 19(3)
Question

It is our understanding that the support which is provided without the existence of prior Intra Group Financial Support (IGFS) agreement still must meet all other conditions set by the Chapter III of Title II of Directive 2014/59/EU (BRRD) (i.e. the chapter which regulates Intra Group Financial Support). Providing IGFS pursuant to Article 19(3) is only possible if, inter alia: 22 conditions set by Article 23 BRRD are met (including the link to article 19, i.e. that each party must be acting in its own best interest); and 22 providing of such financing is notified to the supervisory authority and approved by that authority as required by Article 25. Can this be clarified? Providing IGFS without the prior IGFS agreement could mean that Articles 20, 21 and 22 BRRD would be circumvented and therefore e.g. shareholders (including minority shareholders) would lose entirely the safeguard which is embedded in Article 21 BRRD. Can it be also clarified if it is therefore necessary to apply Articles 20, 21 and 22 to the contract which would be concluded between the IGFS provider and IGFS receiver pursuant to Article 19(3).

Background on the question

Article 19(3) of Directive 2014/59/EU (BRRD) reads: 1cA group financial support agreement shall not constitute a prerequisite: (a) to provide group financial support to any group entity that experiences financial difficulties if the institution decides to do so, on a case-by-case basis and according to the group policies if it does not represent a risk for the whole group; 1d In accordance with the scenarios described in the questions and based on the relevant provisions provided can the matters outlined be clarified?

Submission date
Final publishing date
Final answer

Article 20, 21, 22 as well as Article 25 of Directive 2014/59/EU (BRRD) only apply to the group financial support agreement, which is the agreement defined in Article 19(1) (the IGFS agreement). They cannot be applied by analogy to financial support that is provided on a case-by-case basis as set out in Article 19(3). Case-by-case financial support under Article 19(3) is also not subject to the substantive conditions in Article 23.

As already stated in our response to the question on Article 19(2) (Q&A 2581), making the provision of such financial support subject to such conditions would create legal uncertainty. No ex-ante or ex-post administrative procedure would exist to give clearance for such financial support.

Disclaimer:

This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) 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.

Status
Final Q&A
Answer prepared by
Answer prepared by the European Commission because it is a matter of interpretation of Union law.
Note to Q&A

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Directive 2014/59/EU (BRRD) and continues to be relevant.

Disclaimer

The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.