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List of Q&A's

Safeguarding with a credit institition in a third country

PSD2 article 10(1)(a) require of Payment Institutions (PIs) that "[funds to be safeguarded] shall be deposited in a separate account in a credit institution". Our question is whether an PI authorised and operating in an EU Member State may use a credit institution based in a third country (e.g. UK)? In researching this question, we have looked at the definition of "credit institution" to see whether this contains any relevantt restrictions, but we cannot find any. We first looked at PSD2, but the text does not explicitly define "credit institution". However, PSD2 article 112(2) amends the definition of "credit institution" in Regulation (EU) No 1093/2010 to be "credit institutions as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013". Regulation (EU) No 575/2013, Article (4)(1)(1) states: "(1) ‘credit institution’ means an undertaking the business of which consists of any of the following: (a) to take deposits or other repayable funds from the public and to grant credits for its own account; (b) to carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU of the European Parliament and of the Council ( 6 ), where one of the following applies, but the undertaking is not a commodity and emission allowance dealer, a collective investment undertaking or an insurance undertaking: (i) the total value of the consolidated assets of the undertaking is equal to or exceeds EUR 30 billion; (ii) the total value of the assets of the undertaking is less than EUR 30 billion, and the undertaking is part of a group in which the total value of the consolidated assets of all undertakings in that group that individually have total assets of less than EUR 30 billion and that carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU is equal to or exceeds EUR 30 billion; or (iii) the total value of the assets of the undertaking is less than EUR 30 billion, and the undertaking is part of a group in which the total value of the consolidated assets of all undertakings in the group that carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU is equal to or exceeds EUR 30 billion, where the consolidating supervisor, in consultation with the supervisory college, so decides in order to address potential risks of circumvention and potential risks for the financial stability of the Union; for the purposes of points (b)(ii) and (b)(iii), where the undertaking is part of a third‐country group, the total assets of each branch of the third‐country group authorised in the Union shall be included in the combined total value of the assets of all undertakings in the group;" Furthermore, the UK Electronic Money Regulations (2017) have been amended to explicitly allow UK EMIs to safeguard funds with third country credit institutions - c.f.  https://www.legislation.gov.uk/uksi/2018/1201/schedule/2/paragraph/7/made  "Regulation 21, paragraph 8: "“approved foreign credit institution” means— ... (b)a credit institution that is supervised by the central bank or other banking regulator of an OECD state" ==> In conclusion, our research leads us to believe that it is permissible for an EU PI to safeguard funds in a third country credit institution.

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6882
  • Topic: Other topics
  • Date of submission:

DORA Regulation & Applicability to Third-Country Branches

Is Regulation (EU) 2022/2554 (DORA) applicable to third-country branches that are licensed in our country (EU country) as Credit Institutions?

  • Legal act: Regulation (EU) No 2022/2554 (DORA)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6876
  • Topic: Other DORA topics
  • Date of submission:

Definition of financial institution and mixed activity insurance holding company

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?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6875
  • Topic: Own funds
  • Date of submission:

PISP payment order cancellation due to fraud prevention reasons

Due to fraud prevention reasons, could an ASPSP block a payment order initiated through a PISP despite having informed the PISP immediately upon authentication, that the payment was going to be executed (i.e., after having provided the PISP with the code ACSC under the Berlin Group Standard)? In that scenario who should bear the liability if the payment is not executed but, nonetheless, the payee delivered the good or service promptly after being informed by the PISP of the successful initiation of the payment?  Would the answer be different if the ASPSP had simply confirmed the sufficiency of funds as stated in the EBA Opinion on the implementation of the RTS on SCA and CSC (EBA-Op-2018-04)   

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2018/389 - RTS on strong customer authentication and secure communication
  • ID: 2023_6873
  • Topic: Strong customer authentication and common and secure communication (incl. access)
  • Date of submission:

Mobile Banking Services and SCA in the same app

We use a mobile app, software installed in a separate sandbox on a multi-purpose device, for the elements of strong customer authentication. Is it correct to assume that Article 9 (in COMMISSION DELEGATED REGULATION (EU) 2018/ 389) does not prevent us from offering mobile banking services through the same app?

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2018/389 - RTS on strong customer authentication and secure communication
  • ID: 2023_6863
  • Topic: Strong customer authentication and common and secure communication (incl. access)
  • Date of submission:

CVA treatment of exposures arising from centrally cleared transactions - indirect clearing flows

Does an institution which is a client of a clearing member or a lower-level client in a multi-level client structure (institution > intermediary/higher-level client > clearing member > central counterparty) need to verify that Art. 305 (2) or (3) conditions are met at every level of the structure to exclude the transaction from the own funds requirements for CVA risk in accordance with Art. 382 (3) CRR? Guidance is sought on 4 possible clearing flows: Indirect clearing flows (clients’ transactions and institution’s own transactions) Client > institution > clearing member > CCP Institution > clearing member > CCP Multi-level indirect clearing flows (clients’ transactions and institution’s own transactions) Client > institution > intermediary/higher-level client > clearing member > CCP Institution > intermediary/higher-level client > clearing member > CCP Moreover, would the determination around the exemption from the CVA risk charge change under a scenario where the clearing member (indirect clearing flow) or the intermediary/higher-level client (multi-level client clearing flow) are intragroup entities established in a third country which has not been deemed equivalent under Article 13(2) of Regulation (EU) No 648/2012? This question has been submitted jointly with Q&A 2023_6839

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6840
  • Topic: Market risk
  • Date of submission:

Multi-licensed entity capital requirement

Whether a payment institution that also has a crowdfunding license must meet the capital requirements of both authorizations in aggregate?

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6790
  • Topic: Authorisation and registration
  • Date of submission:

Fraud reporting

How we should treat the transactions that are initiated by PSP (for example refunds, chargebacks, etc.), but those transactions are related to cardholder's actions.

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2018/05 - Guidelines on fraud reporting under PSD2 (amended by EBA/GL/2020/01)
  • ID: 2023_6788
  • Topic: Fraud reporting
  • Date of submission:

Exchange rate mark-ups part of 'all charges payable'/'currency conversion charges'

Is an exchange rate mark-up (the difference between the interbank rate and the exchange rate offered by the PSP to its PSUs) to be considered as part of ‘all charges payable’ as per PSD2 and the ‘currency conversion charges’ as per CBPR2 prior to the initiation of the payment? How should PSPs disclose this in the payment flow? Article 45 of the PSD2 sets out the information and conditions that payment service providers (PSPs) need to provide to the payment service users (PSUs). Notably, Article 45 (1)(c) and (d) states that ‘all charges payable by the payment service user to the payment service providers and, where applicable, a breakdown of those charges’ as well as ‘the actual or reference exchange rate to be applied to the payment transaction’ should be shown to the PSUs.  The CBPR2 builds upon the requirements set out by PSD2, adding an additional layer of disclosures for cross-border payments within the EU.  Concretely, Article 5(1) of the CBPR2 refers to the provisions within Article 45(1) of PSD2 -  "When a currency conversion service is offered by the payer’s payment service provider in relation to a credit transfer, as defined in point (24) of Article 4 of Directive (EU) 2015/2366, that is initiated online directly, using the website or the mobile banking application of the payment service provider, the payment service provider, with regard to Article 45(1) and Article 52, point (3), of that Directive, shall inform the payer prior to the initiation of the payment transaction, in a clear, neutral and comprehensible manner, of the estimated charges for currency conversion services applicable to the credit transfer. Furthermore, Article 5(2) of CBPR2 further explains the necessary charges that need to be shown to the payer -  “Prior to the initiation of a payment transaction, the PSP shall communicate to the payer, in a clear, neutral and comprehensible manner, the estimated total amount of the credit transfer in the currency of the payer’s account, including any transaction fee and any currency conversion charges. The payment service provider shall also communicate the estimated amount to be transferred to the payee in the currency used by the payee.”    

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6777
  • Topic: Other topics
  • Date of submission:

Scope of Article 22(1) CRR

Do undertakings subject to Article 22(1) CRR Sub-consolidation in case of entities in third countries have to comply with Part Two of the CRR in full or shall they only comply with Articles 89, 90 and 91 of Part Two?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6765
  • Topic: Own funds
  • Date of submission:

Interplay between Articles 49(3) and 72e(5) of the CRR

Does the exemption from the requirement to deduct holdings of own funds instruments under Article 49(3) of the CRR also apply with regard to the deductions set out in Article 72e(5)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6763
  • Topic: Own funds
  • Date of submission:

Back-to-Back in regulatory threshold

How should back-to-back trades that net off perfectly when calculating the size of their on- and off-balance-sheet business that is subject to market risk be accounted for? Should both positions be considered in absolute value, both the short and the long position, or should they not be included as the positions perfectly offset each other and do not generate capital requirements for market risk?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6745
  • Topic: Market risk
  • Date of submission:

Retention obligations

An alternative investment fund (“AIF”) managed by an alternative investment fund manager (“AIFM”) pursuant to Directive (EU) 61/2011, is set up to disburse loans to be subsequently securitised. According to Regulation (EU) 2402/2017 (hereinafter, the “Securitisation Regulation”), we believe that the AIFM and the AIF could fall within the definitions of, respectively, “originator” and “original lender”. According to Article 6(1) of the Securitisation Regulation the retention obligation can be fulfilled by either the originator, the original lender or the sponsor (if there is one) of a securitisation: in the above mentioned securitisation, can the retention obligation be therefore assumed alternatively by (i) the AIF as original lender, using the funds made available to it by investors or (ii) the AIFM as originator, using its own funds (i.e. not those of the AIF it manages)?

  • Legal act: Regulation (EU) No 2017/2402 (SecReg)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6741
  • Topic: Provisions applicable to all securitisations
  • Date of submission:

Identify when EMD2 needs to be applied to vouchers/gift cards issued by an electronic money institution.

Do vouchers/gift cards issued by an electronic money institution (EMI) to top-up an e-money account (managed by the EMI itself) in order to purchase on an e-commerce platform: i) goods and services sold directly by companies belonging to the same corporate group of the EMI (thus falling out of the scope of PSD2, encompassing the exemption provided for intra-group transactions in Article 3(1)(n) of the PSD2); ii) goods and services of third-party merchants,  have to be qualified as e-money at the time of issuing (i.e.sale) or - given the possible indefinite use of the funds - they acquire that status only at the moment they are used to purchase goods and services from third-party merchants on the e-commerce platform? 

  • Legal act: Directive 2009/110/EC (EMD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6736
  • Topic: Not applicable
  • Date of submission:

Consideration of own funds requirements as a comparable guarantee to the PII

Would it be acceptable to consider, has a possible comparable guarantee, an increase of own funds’ requirements, in an amount corresponding to the minimum monetary amount calculated in accordance with the EBA’s tool, while ensuring that this amount would be fulfilled with highly liquid assets?

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2023_6675
  • Topic: Monetary amount of the professional indemnity insurance
  • Date of submission:

SRT test in securitisations

When is necessary to make de SRT test in securitisations: at initial assessment only or ongoing monitoring?  

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2022_6674
  • Topic: Securitisation and Covered Bonds
  • Date of submission:

Exemption of exposures to public sector entities

In accordance with Article 429a (1) (j) (iii) of Regulation (EU) No 575/2013 (CRR), as modified by Commission Delegated Regulation (EU) 2015/62, exposures to public sector entities (PSE), treated in accordance with Art. 116 (4) CRR and arising from deposits that the institution is legally obliged to transfer to this PSE for the purpose of funding general interest investment, shall be excluded from the denominator calculation of the institution´s leverage ratio.  Is there any limitation in the type of deposit assets to apply for such exclusion, particularly as regards cash-assimilated instruments (Article 4 (1)(60) CRR), which include certain categories of bonds? What is meant by “legal obligation” and what creates such obligation? Would contractual or statutory obligation qualify as such? Is there furthermore an example for “general interest investment”?  

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/62 - DR with regard to the leverage ratio
  • ID: 2022_6624
  • Topic: Leverage ratio
  • Date of submission:

Approach to determining indirect ownership control powers under the legal definition of a beneficial owner.

What approach to determining the indirect ownership control power under the legal definition of a beneficial owner (“UBO”) as set out in Article 3(6)(a)(i) of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, as amended by Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing should be applied: (a) Determining the ‘share’ of indirect control of a UBO by multiplying the shares at each level of control and checking whether the result of this multiplication is more than 25% (multiplication test); (b) Examining the chain of control whenever a particular link in the ownership chain exceeds the 25% threshold which may, ultimately, lead to a natural person holding more than 25% of the shares or votes in a given indirect parent entity (rolling test); or (c) Verifying whether there is an entity or person who “controls” the entity having more than 25% of the shares or votes in an entity being evaluated, i.e. holds more than 50% of shares or votes in such entity (dominancy test)?

  • Legal act: Directive (EU) 2015/849 (AMLD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2022_6622
  • Topic: Other topics
  • Date of submission:

Information provided to the payee on individual payment transaction

If a framework contract includes a condition on providing all required information to the payee at least once a month, is the payment service provider still obliged to provide the information to the payee after the execution of individual payment transaction? Or providing monthly information is enough and provision of information separately about each individual transaction is not required anymore?

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2022_6612
  • Topic: Other topics
  • Date of submission: