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List of Q&A's

Deduction of indirect holdings of own funds instruments in insurance and reinsurance undertakings which are subsidiaries of insurance holding company from own funds

Should indirect holdings of own funds instruments in insurance and reinsurance undertakings which are subsidiaries of insurance holding company be subject to the exemption provided for in Article 15a(2)(a) of Commission delegated regulation No 241/2014?   

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 241/2014 - RTS for Own Funds requirements for institutions
  • ID: 2022_6398
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 31/03/2023

Treatment of "not designated elements" for the purpose of computing prudential capital requirements

Our entity will apply IFRS 9 provisions regarding hedge accounting to financial reporting starting from January 2022. IFRS 9 §6.5.15 and §6.5.16 introduce a new type of other comprehensive income: when using hedge accounting, an entity may separate some elements considered as a “cost of hedging”, and recognise them in other comprehensive income as “not designated elements”.  Commission Implementing Regulation 2021/451, in its template-related instructions (1.3 Equity §27), mentions that such elements shall be reported in a dedicated line “Hedging instruments [not designated elements]” for the purpose of FINREP. Specifically, this line is distinct from “Hedging derivatives. Cash flow hedges reserve [effective portion]”. However, cash flow hedge reserve and not designated elements are very similar elements: as an evidence, our entity will transfer amounts currently in cash flow hedge reserve to the new category “not designated elements”. We are therefore wondering the regulatory treatment  of “not designated elements” for the purpose of computing prudential capital requirements.  Cash flow hedges reserve shall not be included in any element of own funds (REGULATION (EU) No 575/2013 §33) Should “not designated elements” treatment be aligned on that of the cash flow hedge reserve ? or should “not designated elements” be included in prudential own funds ?  

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2022_6380
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 23/09/2022

Goodwill included in the valuation of significant investments

1. For the purposes of Article 37(b) CRR, are the significant investments of the institution limited to the significant investments in financial sector entities (FSE) or should they include all significant investments (i.e. also significant investments in entities that are not financial sector entities)? 2. Should Article 37(b) CRR be applied only when the significant investments outside the prudential perimeter are valued for prudential purposes using the equity method or should it be applied also when the significant investments are valued for prudential purposes at historical cost?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2022_6374
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 31/03/2023

Calculation of the CET1 deduction for non-performing exposures (NPEs)

Which date shall be used to determine the applicable factor that is used to calculate the amount determined in Article 47c(1)(a) CRR when the terms and conditions of a non-performing exposure, which was originated prior to 26 April 2019, have been modified by the institution in a way that increased the institution's exposure to the obligor and  the counterparty defaulted before the initial origination of the exposure? The date on which the counterparty initially defaulted or the date on which the exposure was initially originated or the date on which the terms and conditions of the NPE have been modified by the institution in a way that increased the institution's exposure to the obligor?     Additionally, which date is supposed to be considered if the default of the exposure/counterparty occurs after the initial date of origination of the exposure and before an increase in amount of exposure? The date of default or the modification date?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2022_6351
  • Topic: Own funds
  • Date of submission:

Effective absence of set-off or netting arrangements

If a statutory set-off or netting right exists and cannot be contractually excluded, would an AT1, T2 or eligible liabilities instrument be automatically considered ineligible pursuant to, respectively, Article 52(1)(r), Article 63(p) or Article 72b(2)(f) of Regulation (EU) No. 575/2013 (CRR) or would the instrument be eligible as long as the conditions for such statutory set-off or netting are not fulfilled, in particular in cases where a counterclaim to be used for set-off or netting does not exist? If a statutory set-off or netting right exists, can be contractually excluded, but has not been excluded, would the instrument be automatically considered ineligible or would the instrument be eligible as long as the conditions for such statutory set-off or netting are not fulfilled, in particular in cases where a counterclaim to be used for set-off or netting does not exist?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6285
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 29/04/2022

Common Equity Tier I Minority Interest Calculation

Should a specific level of profit distribution set by a third country competent authority, and communicated specifically to an institution, be considered “any additional local supervisory regulations in third countries insofar as those requirements are to be met by Common Equity Tier 1 capital” for the purposes of the minority interest calculation provided in Article 84 1 i) and ii))  when this limit has been set above legislative prudential requirements with the aim of preserving capital above an specific limit by the way of limiting profit distribution?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6262
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 29/04/2022

Calculation of goodwill included in the valuation of significant investments in insurance undertakings

A. For the purposes of a deduction under Article 36(1)(b) CRR, should the goodwill (Article 4(1) no. 113 and 115 CRR)  included in the valuation of significant investment                      be calculated at the acquisition date by separating any excess of the acquisition cost over the banking group’s share of the net fair value of the identifiable assets and liabilities of the insurance undertaking or be the amount disclosed as goodwill in the IFRS/NGAAP consolidated balance sheet of the parent institution (or parent financial holding company or parent mixed financial holding company, as applicable) in proportion of the participation recorded for prudential purposes (i.e. in case of participation of 100%, the full goodwill should be deducted, including also goodwill generated at the level of the insurance undertaking)?    B. Would the application of Article 49(1) CRR provide the possibility to risk weight rather than deduct the goodwill included in the valuation of significant investment in insurance undertakings?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6211
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 10/02/2023

Implementation of Article 72b(2)(j) of Regulation (EU) No 575/2013 (“CRR”) and whether the contractual provisions governing liabilities are required to refer to the permission regime in order for the liabilities to qualify as eligible liabilities instruments

In question 2013_544, the EBA stated that for Tier 2 instruments, Article 63(j) CRR, in conjunction with Article 77 of the CRR, stipulates that an institution must not effect the call, redemption, repayment or repurchase prior to the date of an instrument's contractual maturity without the prior permission of the competent authority, and that such instruments should therefore contain an explicit reference to these regulatory conditions in their terms. Article 72b(2)(j) CRR states that liabilities may only be called, redeemed, repaid or repurchased early where the conditions set out in Articles 77 and 78a are met. As there is no explicit positive obligation in the legislation to include a reference to the need for resolution authority approval, should eligible liabilities instruments contain an explicit reference to these regulatory conditions in their terms?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6203
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 15/07/2022

Minimum loss coverage for non-performing exposures under Article 469a

Where the terms and conditions of an exposure which was originated prior to 26 April 2019 are modified in a way that increases the institution’s exposure to the obligor, are all exposures to the obligor that was originated prior to 26 April 2019 also considered as having been originated on the date of the modification and subject to the provisions on the minimum loss coverage for non-performing exposures?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6192
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 21/11/2022

Direct and indirect funding of capital instruments

Is Article 9(1)(c) of Commission Delegated Regulation 241/2014 (RTS) applicable to the funding granted to a borrower that passes the funding on to the ultimate investor for the purchase of an institution’s capital instrument which had been issued and acquired before the funding was granted (e.g. refinancing of the purchase)? The same issue may be raised with reference to Article 8(2) and 8(3) of RTS.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 241/2014 - RTS for Own Funds requirements for institutions
  • ID: 2021_6165
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 22/02/2022

Dutch Residential Real Estate Mortgages - covered by NHG - Nationale Hypotheek Garantie - National Mortgage Guarantee - Calculation of RWA within and outside the Netherlands

If a foreign bank, with a Dutch branch, is exempt from applying the rules from the Dutch NCA for the branch, would this not lead unfair competitive advantage?  

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6105
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 29/04/2022

Clause of substitution of investor or remarketing for capital or internal MREL

In the context of a bond issued by a subsidiary to the parent company recognized as Own Funds or Eligible Liability, would it be possible to insert a clause of change of control that would allow the parent company, if it is no longer the owner of the subsidiary, to automatically sell the bond to the purchaser of the subsidiary?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6104
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 07/09/2022

Definition of parent undertaking for the purposes of CRR

Can an undertaking for which Directive 2013/34/EU (the “Accounting Directive”) does not apply be considered a parent undertaking for the purposes of CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6082
  • Topic: Own funds
  • Date of submission:

Deduction of software assets from Common Equity Tier 1 capital (hereinafter CET1) for investment firms of Class 2 and Class 3

Is it appropriate to apply Article 13a of Commission Delegated Regulation (EU) No 241/2014, amended by Commission Delegated Regulation (EU) 2020/2176, regarding the deduction of software assets from CET1 to investment firms of Class 2 and Class 3, taking into account that the mentioned investment firms are not subject to the application of provisions established in Art. 113(5) and Art. 156 of the CRR, i.e. to apply 100% of risk weight to the portion of the carrying amount of software that is not deducted from CET1?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 241/2014 - RTS for Own Funds requirements for institutions
  • ID: 2021_6079
  • Topic: Own funds
  • Date of submission:

Reduction of own funds according to Article 78(1)(a) CRR

May an institution that intends to reclassify part of its share capital as related share premium apply for the prior permission pursuant to letter (a) of Article 78(1) CRR or should letter (b) be used?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6039
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 11/11/2022

Reduction, distribution and reclassification of share premium accounts related to own funds instruments

May an institution announce to the holders of own funds instruments the reduction, distribution or reclassification of related share premium accounts before that institution has obtained the prior permission of the competent authority foreseen under Article 77(1)(b) CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 241/2014 - RTS for Own Funds requirements for institutions
  • ID: 2021_6031
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 20/06/2022

Reduction of own funds according to Article 78(1)(a) CRR

If an institution applies for an own funds reduction with replacement pursuant to Article 78(1)(a) CRR, may such institution include in its own funds at the same time both the replacing instruments and the replaced instruments? Or should a request for a permission under Art 77 CRR be assessed according to Article 78(1)(b) CRR if the institution includes both the replaced and the replacing instruments at any point in time simultaneously in own funds, considering the consequent decrease of own funds that will occur when the replaced instrument is finally called back/repurchased, or redeemed?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6022
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 26/01/2023

Exemption from and alternatives to deduction from Common Equity Tier 1 items

For the purpose of Article 48(1)(a) CRR, should the applicable amount of insufficient coverage for non-performing exposures under Article 36(1)(m) CRR be included among the other points of Article 36(1) CRR considered under par. (ii) of Article 48(1)(a) CRR, even though not expressly mentioned? The same issue arises with reference to Article 46(1)(a)(ii) CRR and Article 48(1)(b)(ii) CRR.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6021
  • Topic: Own funds
  • Date of submission: