Question ID
2023_6875
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Own funds
Article
4
Paragraph
1
Subparagraph
20, 21, 26
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
NA
Type of submitter
Competent authority
Subject matter
Definition of financial institution and mixed activity insurance holding company
Question

Can a mixed-activity insurance holding company (MAIHC) that has at least one subsidiary credit institution pursuant to Article 4(1)(1) CRR qualify as a financial institution pursuant to Article 4(1)(26) CRR?

Background on the question

A holding company (HoldCo) has several subsidiaries, some of which are insurance undertakings, others are financial institutions and/or ancillary services undertakings, and at least one is a credit institution. The group does not qualify as a financial conglomerate under Article 2(14) of Directive 2002/87/EC (FICOD) because the insurance part of the group does not reach the significance thresholds set out in Article 3(2) or (3) of the FICOD (i.e. the EUR 6 bn. and the 10% ratio thresholds). Considering that the HoldCo does not qualify as a financial conglomerate, it does not fulfil the definition of mixed financial holding company (MFHC) set out in Article 2(15) of the FICOD, and consequently the HoldCo also does not qualify as an MFHC for prudential purposes pursuant to Article 4(1)(21) CRR.

It is further noted that the HoldCo fulfils the conditions for being a MAIHC as per Article 212(1)(g) of Directive 2009/138/EC (Solvency II Directive).

Furthermore, while the insurance subsidiaries account for only a small fraction of the HoldCo’s equity, assets and revenues on a consolidated basis, the HoldCo could qualify as a financial holding company (FHC) in the meaning of Article 4(1)(20) CRR only if it were also to qualify as a financial institution in the meaning of Article 4(1)(26) CRR. However, according to a literal reading of the definition of financial institution in Article 4(1)(26) CRR, a MAIHC is excluded from qualifying as a financial institution. Therefore, according to a literal reading of this definition, the HoldCo cannot be considered at the same time both (i) a financial institution, and consequently a FHC, and (ii) a MAIHC.

This would imply that solely because the HoldCo holds a small fraction of its equity, assets and revenues in insurances subsidiaries, it would ultimately not be subject to prudential consolidation despite the fact that subsidiaries of the HoldCo include a credit institution and other financial institutions: 40% of the group’s assets relate to banking services and another 40% of its assets relate to (financial and operational) leasing activities; less than 1.5% of the group’s assets are associated with the insurance sector.

Submission date
Rejected publishing date
Rationale for rejection

The question has been rejected because the legal basis it refers to has been revised in the light of the amendments introduced by the EU Banking Package and the issue it raises will be addressed in the new wording of Article 4(1)(26) of Regulation (EU) No 575/2013 (CRR). The Single Rule Book Q&A tool has been established to provide explanations and non-binding interpretations on questions relating to the practical application or implementation of the provisions of legislative acts referred to in Article 1(2) of the EBA’s founding Regulation, as well as associated delegated and implementing acts, and guidelines and recommendations, adopted under these legislative acts. For further information on the purpose of this tool and on how to submit questions, please see 'Additional background and guidance for asking questions'.

Status
Rejected question