The definition of a financial sector entity with respect to ancillary services undertakings.

Shall Visa Inc. and/or Visa Europe be included as ancillary services undertakings and thereby as financial sector entities?

According to article 36 (h) and (i) of the CRR, institutions shall deduct the applicable amount of direct, indirect and synthetic holdings of CET 1 instruments of financial sector entities. There are exceptions for these deductions within certain limits. The definition of financial sector entity in Article 4 point 27 also applies to ancillary services undertakings included in the consolidated financial situation of an institution. According to article 4 point 18, "ancillary services undertaking" means an undertaking the principal activity of which consists of owning or managing property, managing data-processing services, or a similar activity which is ancillary to one or more institutions. Visa Europe is a recognized payment system and is wholly owned by Visa Inc. Visa Inc is a technology service provider to numerous institutions. As the financial industry is dependent on the systems, Visa Inc and Visa Europe might be defined as ancillary services undertakings. However, to be considered as a financial sector entity, Visa Inc. or Visa Europe must be included in the consolidated financial situation of an institution. We find it difficult to understand the rationale for the addition in article 4 point 27 that the ancillary services undertakings must be included in the consolidated financial situation of an institution to be considered a financial sector entity. If the undertaking is included on a consolidated basis of an institution, the deduction rules will not apply to this institution. If the enterprise is included on a consolidated basis of an institution other than the institution subject to the deduction rules, the risk and thus the need for the institution to make a deduction would rather be less than greater