Deduction requirements in accordance with Article 36(1) (f), (h) and (i) CRR: Netting of long and short positions in intermediate entities in the context of Article 15e (7) of Delegated Regulation (EU) No 241/2014 (“RTS Own Funds”)

Can an institution, in applying Article 15e (7) of Delegated Regulation (EU) No 241/2014 for the purpose of fulfilling the deduction requirements in accordance with Article 36(1) (f), (h) and (i) CRR – provided that all the conditions of Article 42 CRR are met - net long positions in an intermediate entity (such as an ETF) with corresponding short positions?

The institution, which is a CRR investment firm, holds a long equity position in an exchange traded fund (a CIU according to Article 4 (1)(7) CRR). In addition it holds a short position in the ETF exactly mirroring its long equity position. Both positions are held within the trading book. The institution can neither look through to the underlying exposures of the ETF to identify any potential "indirect holdings" of own CET1 instruments/of CET1 instruments of FSEs for the purpose of applying the deduction rules according to Article 36(1) (f), (h) and (i) CRR, nor can it, in accordance with Article 15e (6) of Delegated Regulation (EU) No 241/2014 (RTS Own Funds Part 3) instead estimate the necessary deduction items by using the maximum amounts as reflected in the fund’s investment mandate. According to Article 15e (7) of Delegated Regulation (EU) No 241/2014 in such a case the institution has to treat the amount of funding that it holds in the intermediate entity [i.e. the ETF] as an investment in its own CET1 instruments and correspondingly has to deduct it from its CET1 capital in line with Article 36(1) (f) CRR.