Question ID
2014_1424
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Market risk
Article
296
Paragraph
1
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Type of submitter
Competent authority
Subject matter
Recognition of contractual netting agreements by the competent authority
Question

Should the provision of Article 296(1) of Regulation (EU) No 575/2013 (CRR) that “competent authorities shall recognise a contractual netting agreement …” be understood as a requirement to have an acceptance made by the supervisory authority, in particular in the course of performing its on-site or off-site activities, or rather to receive a formal permission (e.g. in a form of an administrative decision) of a competent authority?

Background on the question

According to the Article 296(1) of the CRR, competent authorities shall recognise a contractual netting agreement on given conditions. In our opinion, the exact meaning of the word “recognise” and whether or not it should be treated as identical to the phrase “give permission”, should be taken into consideration and be subject to clarification by the EBA, as it is unclear what the expected form of that “recognition” is. The importance of distinguishing (or equalising) the meanings of those two phrases lies in possible interpretations in light of the given national legal system. In particular, in Poland, an interpretation of “shall recognise” as equivalent to “shall give permission” would cause a necessity to issue a formal administrative decision by the KNF-PFSA (according to the Polish Code of Administrative Proceedings) which would result in an obligation to apply for such permission in the case of every single contractual netting agreement to be recognised as risk-reducing.

Submission date
Final publishing date
Final answer

Article 296(1) of Regulation (EU) No 575/2013 (CRR) does not prescribe the form of the recognition by the competent authority.

 

DISCLAIMER:

This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for 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 not yet been reviewed by the European Commission in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).

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.