Question
Should exposures of a financial holding company (Company A) to a company that is not an institution or a financial institution and is not covered by prudential consolidation ("Company B") be included in the statement of large exposures on a prudential consolidated basis at the level of Company A, taking into account Company A is not an institution within the meaning of Art. 4, Para. 3 of Regulation 575/2013?
Background on the question
A joint-stock company ("Company A") is a commercial company that is not an institution within the meaning of Art. 4, Para. 3 of Regulation 575/2013, but is identified as a financial holding company within the meaning of Art. 4, Para. 20 of Regulation 575/2013. Company A has exposures (shareholdings and receivables under commercial agreements) to a subsidiary joint stock company ("Company B") before Company A had been qualified as a financial holding company or even Regulation 575/2013 was adopted. Company B is neither an institution nor a financial institution within the meaning of Regulation 575/2013 and is not covered by the prudential consolidation under Art. 11 Regulation 575/2013. According to Art. 11, Para. 1 of Regulation 575/2013, parent institutions in a Member State shall comply, to the extent and in the manner set out in Article 18 of Regulation 575/2013, with the obligations laid down in Part IV (“Large Exposures”) on the basis of their consolidation situation. According to Art. 11, Para. 2 of Regulation 575/2013, or the purpose of ensuring that the requirements of the Regulation are applied on a consolidated basis, the terms "institution", "parent institution in a Member State", "EU parent institution" and "parent undertaking" shall also refer to a financial holding company. According to Art. 394, Para. 1 of Regulation 575/2013, institutions shall report to their competent authorities certain information on their large exposures. According to Art. 391 of Regulation 575/2013, for the purposes of calculating the value of exposures the term “institution” shall include a private or public undertaking, including its branches, which, were it established in the Union, would fulfil the definition of the term “institution” and has been authorized in a third country that applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union.
Answer
This question has been rejected because the issue it deals with is already explained or addressed in Article 391 of Regulation (EU) No 575/2013 (Capital Requirements Regulation or CRR) as amended by Regulation (EU) 2019/876.For further information on the purpose of this tool and on how to submit questions, please see “Additional background and guidance for asking questions".