rticle 9(1)(c) of Commission Delegated Regulation 241/2014 (RTS) read as follows: ‘’The applicable forms and nature of indirect funding of the purchase of an institution’s capital instruments shall include (…) (c) funding of a borrower that passes the funding on to the ultimate investor for the purchase, at issuance or thereafter, of an institution’s capital instruments’’.

While Article 9(1)(c) RTS seems to clearly refer to the case in which the funding has been granted to the borrower and passed on the ultimate investor before the issuance or the acquisition of the ownership of the capital instruments, it is not as much clear whether the same provision covers the case in which the funding has been granted after the issuance or the acquisition of the ownership of the capital instrument (e.g. for the refinancing of such purchase).

It would be reasonable to argue that Article 9(1)(c) RTS should cover both circumstances as it cannot be excluded that the funding of a borrower – who passes the funding on to the ultimate investor – may be granted by the institution after the issuance or the acquisition of the ownership of the capital instruments, for example, in order to refinance the earlier acquisition. In this case, the funding would be granted after, but for the ultimate purpose of purchasing the capital instrument.

From the prudential point of view, both cases may indeed lead to the same result of preventing the issuer to genuinely receive new funds (Q&A 2013_8) as a consequence of the issuance or the subsequent placement in the secondary market of the instrument.

For this reason, ‘’at issuance or thereafter’’ should be read as referring to the timing of the purchase of the instruments, and the expression “passes the funding on to the ultimate investor for the purchase” should not be read so that it would limit the point in time in which the funding should be granted in order to be relevant for the purposes of Article 9(1)(c) RTS and Articles 28(1)(b), 52(1)(c) and 63(1)(c) CRR.

In the same vein and a fortiori, Article 8(2) and 8(3) RTS on direct funding of capital instruments - that does not explicitly specify the point in time in which the funding has to be granted - should be read as covering also the case in which the funding has been granted to the borrowers indicated therein after the acquisition of the ownership of the instruments.