Recognition of contractual netting of legal entities of a group

Could you please specify whether the last subparagraph of Article 295 of CRR ("Netting across transactions entered into by different legal entities of a group shall not be recognised for the purposes of calculating the own funds requirements."), which applies to all three types of contractual netting agreements from point (a) to (c), does not allow recognition of netting for the purposes of calculating the own funds requirements between two members of the same banking group generally (even on a bilateral basis) or netting other than on a bilateral basis between two members of the same banking group?

The requirement, which was included in the Directive 2006/48 in Annex III, Part 7 – contractual netting, is now separated from the "point (iii) contractual cross product netting agreement" and it is valid for all three types of contracts. The EC answered the question closely relating to that issue regarding previous regime (available under: http://ec.europa.eu/yqol/index.cfm?fuseaction=question.show&questionId=559 ), but at the time the answer was provided this limitation related only to the contractual cross product netting. In our opinion, netting agreements can be recognised as risk reducing only for netting agreements with entities not included in a group, and therefore limitation applies to all intra-group netting agreements (even on bilateral basis), since it is now applicable for all three types of contractual netting agreements set Article 295 of CRR from point (a) to (c). The sentence in question would also be meaningless, if it considered only multilateral agreements, taking into the account the recognition of netting agreements according to Article 295 of CRR and there would be no need for additional limitation. Also from the EMIR point of view intra-group transactions with OTC derivatives could be exempted from clearing obligation and obligation to exchange collateral. Therefore, these transactions pose additional risk for entities of a group and in our opinion, should not be excluded from own funds requirements of a bank as separate entity of a group as safeguard against risk concentration. From this perspective, the regulatory intent was to exclude bilateral and multilateral netting agreements from benefits of recognition of netting agreements for prudential purposes.