Question ID
2023_6919
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Own funds
Article
3
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
36
Type of submitter
Individual
Subject matter
Deductions from Common Equity Tier 1 items
Question

1. Bank owns usd 20 million worth of 18% ordinary shares of a financial institution Alpha Bank. Alpha Bank has also invested usd 12 million to this bank's CET1 in order to artificially inflate the capital of both banks.  When calculating regulatory capital, USD 12 million reciprocal cross-holding was deducted from CET1. Now, when the bank calculates adjustments for investments in the capital of financial entities, should it count the investment in Alpha Bank as 8 million, and even if so, will it be considered a significant investment or an insignificant investment?

2.  Bank has a wholly owned subsidiary, Valeria Ltd, which is a non-financial entity. Valeria Ltd holds 100% of the shares of Karina Insurers, which is a financial institution. Should the bank now consider this as a significant investment (here indirect) in a financial institution and make deductions accordingly, or should the bank consider only Valeria Ltd in deductions (alternatively 1250% RW) as a qualifying non-financial holding? If the first option is the correct answer, should it ignore the investment in Valeria Ltd?

3.  A bank has 100 million CET1 and 10 million AT1 capital. The bank then invests 50 mln to buy 100% of an insurance company that holds the bank's 10 mln AT1. When recalculating the regulatory capital, the bank deducts 40 mln (50 - 100*10%) from CET1 as an investment in financial sector entities above the 10% threshold. Now, when calculating AT1, should the bank make an adjustment to 10 mln AT1 because it is considered an investment in own capital? If so, how much?

Background on the question

All questions are related to Article 36 of 575/2013

Submission date
Rejected publishing date
Rationale for rejection

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Status
Rejected question