Recognition of minorities arising from an intermediate financial holding company

In the example below, are the minority interests of 20% in (mixed) financial holding company no. 1 – after applying the deductions according to Article 84 CRR – eligible for the consolidated own funds of the group?

The parent company of a credit institution is (mixed) financial holding company no. 1 and the parent company of this (mixed) financial holding company no. 1 is (mixed) financial holding company no 2. Thereby, (mixed) financial holding company no. 2 owns 80% in (mixed) financial holding company no. 1. The institution and both (mixed) financial holding companies are located in the same Member State and are subject to Articles 11 and 18 CRR. The minority interests are pari-passu to the majority interests and are available to cover losses at the level of (mixed) financial holding company no. 1. Article 81 CRR defines minority interests as comprising the sum of Common Equity Tier 1 instruments, the share premium accounts related to those instruments, retained earnings and other reserves of a subsidiary, provided this subsidiary is an institution or an undertaking subject by virtue of applicable national law to the requirements of the CRR and CRD IV, and subject to full inclusion in prudential consolidation. Is a (mixed) financial holding company considered as being a company according to Article 81(1)( a)(ii) CRR? We are not sure what is meant “by virtue of national law” as a (mixed) financial holding company is subject to the CRR prudential consolidation rules by virtue of the CRR. Recital 38 of the CRR is supporting our view: The minority interests arising from intermediate financial holding companies that are subject to the requirements of this Regulation on a sub-consolidated basis may also be eligible, within the relevant limits, as Common Equity Tier 1 capital of the group on a consolidated basis, as the Common Equity Tier 1 capital of an intermediate financial holding company attributable to minority interests and the part of that same capital attributable to the parent company support both pari passu the losses of their subsidiaries when they occur. Please also see the CP ECB Guide on options and discretions available in Union law (chapter 2 Own Funds – para 11): “MINORITY INTERESTS INCLUDED IN CONSOLIDATED COMMON EQUITY TIER 1 CAPITAL (Article 84 of the CRR)/ The ECB considers that it is appropriate to apply Article 84(1) of the CRR to a parent financial holding company of a credit institution in all cases, in order to ensure that only that part of the consolidated own funds that is promptly available to cover losses at the parent level is included in the regulatory capital.”