Implementation of the Article 12e(4) of Regulation EU 2019/876 (“CRR”) for subsidiaries that do not belong to the same resolution group as the EU parent institution.

Is it possible to adopt a reading of Article 12a and 92a CRR that would allow the application of the provision to subsidiaries established in third countries that are not included in a resolution group of the parent institution in line with point (83b)(iii) of Article 2(1) of Directive 2014/59/EU (“BRRD”)?

Article 12a CRR provides that G-SII groups with multiple point of entry (“MPE”) resolution strategy shall calculate the theoretical SPE requirement and compare it with the sum of the MPE requirements. However, the definition of “resolution entity” in Article 2 (83a) BRRD refers to a person established in the Union. While the definition of “resolution group” in Article 2 (83b) BRRD provides flexibility with respect to the possibility of including subsidiaries in third countries in any resolution group, it would not be possible to identify resolution groups with resolution entities established outside the EU in the resolution plans for banking groups with parent entities established in the Union. Consequently, the sum of the parts of an MPE group could only be performed with resolution groups established in the EU. This would contradict the spirit of the TLAC Term Sheet developed by the Financial Stability Board (FSB), which allows the identification of resolution entities in all FSB member jurisdictions that adhere to the FSB principles.