Question ID
2016_2685
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
208
Paragraph
5
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Name of institution / submitter
ING Bank Slaski S.A.
Country of incorporation / residence
Poland
Type of submitter
Credit institution
Subject matter
Definition of “effective procedures” to monitor that the property taken as credit protection is adequately insured against the risk of damage.
Question

What are the minimal criteria of adequate insurance of property against the risk of damage that the "procedures" should consist of in order to be assessed as effective?

Background on the question
A credit institution has effective procedures in place to monitor that the property taken as credit protection is adequately insured against risk of damage and, in case of incompliance, effectively takes adequate remedial actions. These procedures include insurance requirements that the client is obliged to fulfil as well as the monitoring, control and reporting rules that the bank has to follow - to assure the adequacy of the property insurance against risk of damage. However, CRR does not define what are the minimal criteria of adequate insurance of property against the risk of damage that the "procedures" should consist of in order to be assessed as effective. Should institution assume that the minimal criterion of adequate insurance of property against the risk of damage is the valid insurance policy? In that case, other requirements included in "procedures" - for instance, assignment/pledge of the property insurance and the confirmation of the pledge from insurance company - are introduced by the internal decision of credit institution in the area of collateral management rules.
Submission date
Final publishing date
Final answer
The competence to interpret European legislation belongs exclusively to the Court of Justice of the European Union. In the absence of a formal definition under EU law and a definitive interpretation by the Court, the meaning of "effective procedure" has to be determined depending on the context, as well as existing prudential regulation, supervisory practice and jurisprudence. 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.