Question
What does Article 5(2) of the Commission Delegated Regulation (EU) 2015/63 mean by the requirement to “evenly deduct” certain liabilities? Could you please provide any examples?
Background on the question
Pursuant to Article 5(2) of the Commission Delegated Regulation (EU) 2015/63 (hereinafter as ‘DA’) specific liabilities shall be evenly deducted on a transaction by transaction basis from the amount of total liabilities of institutions which are parties of indicated transactions or agreements. Example: Supposing that a) bank A placed a deposit of EUR 10 with bank B, b) both the bank A and the bank B are members of the same group, and c) the transaction fulfills all necessary conditions as laid down in the Article 5(1)(a) of DA. In such a case the bank B has a liability of EUR 10 towards the bank A. Bank A has an asset of EUR 10 (i.e. the deposit) and no liability towards bank B. Even deduction appears to imply that the contribution base both of bank A and bank B would be decreased by EUR 5.
Answer
The requirement to 1cevenly deduct 1d certain liabilities means that the notional amount of each liability which meets the requirements of Article 5(1) of the DA shall be divided by the number of the institutions which are parties to the contract, on which the liability is based and the resulting amount shall be deducted from the liabilities which constitute the contribution base of each of those institutions. In the example provided above this means that the liabilities which form the contribution base of bank B will decrease by EUR 5 and the liabilities which form the contribution base of bank A will decrease also by EUR 5 even if the banks are seated in different Member States. Disclaimer: This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.