Meaning of ‘pure industrial holding company’ in the definition of financial institution.

How should the term ‘pure industrial holding company’ be understood in the context of the definition of ‘financial institution’ in accordance with article 4(1)(26) CRR? Would a holding company, the investments of which are exclusively outside of the financial sector, qualify as ‘purely industrial’ for the purposes of that definition?

Regulation (EU) 2019/876 has modified the definition of ‘financial institution’ in Article 4(1)(26) of Regulation (EU) No 575/2013 (CRR) to exclude ‘pure industrial’ holding companies’. Prior to this modification, Q&A 857 already stated that ‘the part of the definition of "financial institution" in Article 4(26) that refers to the principal activity of acquiring holdings does not include purely industrial holding companies’. However, the concept of ‘pure industrial holding company’ remains undefined in the Regulation. Scenario 1: A bank owns a significant investment in a listed holding company. We seek guidance on whether the concept of ‘pure industrial holding company’ would encompass this listed company, the only activity of which is to acquire holdings in other undertakings. The company and its holdings have the following features: - The company’s holdings consist on minority and majority stakes in the capital of listed and unlisted non-financial sector companies. The company usually requires having presence in the Board of Directors. - Their purpose is to generate a return for its investors through the creation of value and the ultimate sale of its investments. - It will normally seek to achieve that return by assisting the investee companies in carrying out their business strategies in a way which contributes to their long term value. The average holding period of the investments is around 10 years. - The company manages internally its portfolio and their risks. - The company does not meet the conditions to be considered an AIFM. - The company funds its investments fundamentally with capital, debt is not a significant source of funding. Scenario 2: it is unclear if the solution would be different in case the company had a financial institution as a subsidiary (i.e. an asset management company) but of immaterial size compared with its total assets.