EBA · 2014_1424 Final Q&A

Recognition of contractual netting agreements by the competent authority

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
296, para. 1
Topic
Market risk
Submitted by
Competent authority
Submitted
2014-08-07
Answered
2014-12-12
Answer provided by
ESAs (EBA, ESMA, EIOPA)
Browse ECB SSM Register → More Q&As on this regulation →

Question

Should the provision of Article 296(1) of Regulation (EU) No 575/2013 (CRR) that “competent authorities shall recognise a contractual netting agreement …” be understood as a requirement to have an acceptance made by the supervisory authority, in particular in the course of performing its on-site or off-site activities, or rather to receive a formal permission (e.g. in a form of an administrative decision) of a competent authority?

Background

According to the Article 296(1) of the CRR, competent authorities shall recognise a contractual netting agreement on given conditions. In our opinion, the exact meaning of the word “recognise” and whether or not it should be treated as identical to the phrase “give permission”, should be taken into consideration and be subject to clarification by the EBA, as it is unclear what the expected form of that “recognition” is. The importance of distinguishing (or equalising) the meanings of those two phrases lies in possible interpretations in light of the given national legal system. In particular, in Poland, an interpretation of “shall recognise” as equivalent to “shall give permission” would cause a necessity to issue a formal administrative decision by the KNF-PFSA (according to the Polish Code of Administrative Proceedings) which would result in an obligation to apply for such permission in the case of every single contractual netting agreement to be recognised as risk-reducing.

Answer

Article 296(1) of Regulation (EU) No 575/2013 (CRR) does not prescribe the form of the recognition by the competent authority.   DISCLAIMER: This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Financial Stability, Financial Services and Capital Markets Union) 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.

Original source: European Banking Authority, Q&A ID 2014_1424

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

Similar Q&As

Counterparty Credit Risk

Answered 2014-03-28

Recognition of contractual netting of legal entities of a group

Answered 2015-09-25

Netting of Derivatives

Answered 2016-06-10

Consideration of collateral in the current exposure method

Answered 2014-04-30

Application of requirements on a sub-consolidated basis

More Q&As on this topic

Application of Article 207(2) of the CRR to financial collateral under the counterparty credit risk framework

Answered 2026-05-29

SPV repack transactions

Answered 2026-05-29

Exclusion of back-to-back positions from RRAO

Answered 2025-10-31

Sources for external classification that is commonly used in the market for grouping issuers by sector, for the purpose of CRR Article 325ah.

Answered 2025-10-17

Multilateral development banks classification for the purpose of article 325ah

Answered 2025-06-27

📋 Track EU financial regulation continuously

Forseti monitors EU financial regulation and delivers personalised alerts anchored to verified official sources.

Start free trial → Learn more

14-day free trial. No credit card required.