Do group financing companies belonging to non-financial company groups (e.g. in the industrial sector) qualify as a "financial sector entity" according to Article 4 (1) (27) CRR?
Industrial companies that are structured as a group often use their own group financing companies to raise capital. The main purpose of these group financing companies is to issue international bonds (corporate bonds) and to provide funds exclusively to companies of the group. Apart from senior corporate bonds, these group financing companies do also issue subordinated corporate bonds. If these group financing companies were to qualify as a "financial sector entity" within the meaning of Article 4 (1) (27) CRR, the subordinated bonds would be regarded as capital instruments according to Article 62 (a) CRR (Tier 2) and - as a consequence - Article 66 CRR would require institutions to deduct the subordinated corporate bond from its own funds.
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