Own funds deduction (granted subordinated loan)

Article 66(d) of Regulation (EU) No. 575/2013 (CRR) states that direct, indirect and synthetic holdings by an institution of the Tier 2 instruments of financial sector entities where the institution has a significant investment in those entities, excluding underwriting positions held for fewer than five working days, shall be deducted from Tier 2 items. This treatment would also apply to capital instruments and granted subordinated loans, as described under Article 62(a) of the CRR, which meet the requirements of Article 63 of the CRR, and thus qualify as Tier 2. Institution 'A' therefore has to deduct the subordinated loan from its own funds according to the rules set out in the CRR. However, for the purposes of calculating own funds on an individual basis and a sub-consolidated basis, where the loan is granted to a financial sector entity included in the same scope of consolidated supervision as the institution granting the loan, Article 49(2) applies. DISCLAIMER: This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Internal Market and Services) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.