EBA · 2015_2029 Final Q&A

Intragroup liabilities elimination with joint venture company

Regulation
Directive 2014/59/EU (BRRD)
Article
103, para. 7
Topic
Resolution financing arrangements
Submitted by
Competent authority
Submitted
2015-06-01
Answered
2015-10-30
Answer provided by
ESAs (EBA, ESMA, EIOPA)

Question

CSOB owns 55% in the joint venture company. In the paragraph 9 is written that "For the purpose of calculating the basic annual contribution of a group entity, the total liabilities to be considered should not include the liabilities arisen from any contract which that group entity concluded with any other entity which is part of the same group. However, such exclusion should only be possible where each group entity is established in the Union, is included in the same consolidation on a full basis, is subject to an appropriate centralized risk evaluation, measurement and control procedures, and if there are no current or foreseen material practical or legal impediments to the prompt repayment of the relevant liabilities when due. This should prevent liabilities from being excluded from the basis of calculation of the contributions if there are no guarantees that intragroup lending exposures would be covered where the financial health of the group deteriorates. " CSOB for the joint venture company uses proportional method of consolidation, also eliminating the 55% of intragroup liabilities for the regulatory purposes and prudential reporting. The question is if for the basic resolution contribution puproses also elimitate the 55% of those intragoup liabilies or not (not full method of consolidation applied).

Background

CSOB owns 55% in joint venture company. The concolidated method is proportional not full basis. For the regulatory and prudential reporting purposes, we eliminate 55% of intragoup libilities with this company. Should the same approach be applied for the intragroup liabilities elimination regarding the resolution fund contribution calculation?

Answer

Article 5 (1) of the Commission Delegated Regulation (EU) 2015/63 provides that intragroup liabilities arising from transactions entered into by an institution with an institution which is part of the same group can only be excluded from the basis of calculation of ex-ante contributions to the resolution financing arrangements where, amongst meeting other conditions, each institution is included in the same consolidated supervision in accordance with Articles 6-17 of Regulation (EU) No 575/2013 on a full basis. It follows that it is not possible to exclude intragroup liabilities arising from transactions entered into by an institution with an institution which is part of the same group (including but not limited to a joint venture company which forms part of the same group) where the relevant competent authority permits, in accordance with Article 18 of Regulation (EU) No 575/2013 or otherwise, proportional consolidation in respect of the relevant subsidiary.

Original source: European Banking Authority, Q&A ID 2015_2029

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.

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