EBA · 2020_5122 Rejected question

Group financing companies of non-financial company groups / definition of "financial sector entity" in Article 4 (1) (27) CRR

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
4, para. 1
Topic
Other issues
Submitted by
Other
Submitted
2020-02-12
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Question

Do group financing companies belonging to non-financial company groups (e.g. in the industrial sector) qualify as a "financial sector entity" according to Article 4 (1) (27) CRR?

Background

Industrial companies that are structured as a group often use their own group financing companies to raise capital. The main purpose of these group financing companies is to issue international bonds (corporate bonds) and to provide funds exclusively to companies of the group. Apart from senior corporate bonds, these group financing companies do also issue subordinated corporate bonds. If these group financing companies were to qualify as a "financial sector entity" within the meaning of Article 4 (1) (27) CRR, the subordinated bonds would be regarded as capital instruments according to Article 62 (a) CRR (Tier 2) and - as a consequence - Article 66 CRR would require institutions to deduct the subordinated corporate bond from its own funds.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2020_5122

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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