EBA · 2023_6816 Rejected question

Treatment of corporate debt securities issued by entities that are set up to raise financing for the parent company or group in the LCR liquid asset buffer

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
Annexes 24 and 25, CRR, para. -
Topic
Liquidity risk
Submitted by
Credit institution
Submitted
2023-06-02
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Question

Can corporate debt securities that are issued by entities that are set up to raise financing for the parent company or group be included in the LCR liquid asset buffer, considering that that the main business of this specific entity within the group is the participation of securities issues, which is one of the activities listed in Annex I to Directive 2013/36/EU?

Background

Corporate debt securities are often issued by entities that are especially set up to raise finance for the Group. For example Famous Car Company X has set up subsidiary Famous Car Company X Finance Ltd. to issue corporate debt securities. In accordance with article 7(4)(g) of the LCR Delegated Act assets from entities that perform one or more of the activities listed in Annex I to Directive 2013/36/EU should be excluded from the LCR liquid assets. How should we interpret article 7(4)(g), i.e. should we look at the activities from the issuing entity specifically or at the activities of the group as a whole? And does it matter whether or not the parent company guarantees the obligations of the issuing entity?
No answer published yet.

Original source: European Banking Authority, Q&A ID 2023_6816

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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