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Text applicable on 1 Jan 2017Consolidated version of 1 Jan 2017In forceUnofficial text · authentic on EBA (PDF) (opens in a new tab)

GL-SBE Section 2 — as applicable on 1 Jan 2017 (version of 1 Jan 2017)

2

Subject matter, scope and definitions

On this provision: 1 EBA Q&A

Subject matter

5.

These guidelines specify the methodology that should be used by institutions, as part of their internal processes and policies, for addressing and managing concentration risk arising from exposures to shadow banking entities. In particular, these guidelines specify criteria for setting an appropriate aggregate limit on exposures to shadow banking entities which carry out banking activities outside a regulated framework, as well as individual limits on exposures to such entities.

Scope of application

6.

These guidelines fulfil the mandate given to the EBA under Article 395(2) of Regulation (EU) No 575/2013(26).

7.

These guidelines build in particular on Articles 73 and 74 of Directive 2013/36/EU(27), which require institutions to have sound, effective and comprehensive strategies and processes to assess and maintain on an ongoing basis the amounts, types and distribution of internal capital that they consider adequate to cover the nature and level of the risks to which they are or might be exposed, as well as effective processes to identify, manage, monitor and report such risks and adequate internal control mechanisms; and Articles 97 and 103 of Directive 2013/36/EU, which establish that competent authorities must review the arrangements, strategies, processes and mechanisms implemented by institutions to comply with Regulation (EU) No 575/2013 and Directive 2013/36/EU, and evaluate the risks to which the institutions are or might be exposed, and that they may apply the supervisory review and evaluation process (SREP) to institutions which are or might be exposed to similar risks or pose similar risks to the financial system.

8.

These guidelines apply to exposures to shadow banking entities as defined below.

9.

These guidelines apply to institutions to which Part Four of Regulation (EU) No 575/2013 (Large Exposures) applies, in accordance with the level of application set out in Part I, Title II, of that Regulation.

Addressees

10.

These guidelines are addressed to competent authorities as defined in point (i) of Article 4(2) of Regulation (EU) No 1093/2010 and to financial institutions as defined in Article 4(1) of Regulation No 1093/2010.

Definitions

11.

Unless otherwise specified, terms used and defined in Regulation (EU) No 575/2013 and Directive 2013/36/EU have the same meaning in the guidelines. In addition, for the purposes of these guidelines, the following definitions apply:

Credit intermediation activities

Bank-like activities involving maturity transformation, liquidity transformation, leverage, credit risk transfer or similar activities.

These activities include at least those listed in the following points of Annex 1 of Directive 2013/36/EU: points 1 to 3, 6 to 8, and 10.

Exposures to shadow banking entities

Exposures to individual shadow banking entities pursuant to Part Four of Regulation (EU) No 575/2013 with an exposure value, after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403 and exemptions in accordance with Articles 400 and 493(3) of that Regulation, equal to or in excess of 0.25% of the institution’s eligible capital as defined in Article 4(1)(71) of Regulation (EU) No 575/2013.

Shadow banking entities

Undertakings that carry out one or more credit intermediation activities and that are not excluded undertakings.

Excluded undertakings

(1) undertakings included in consolidated supervision on the basis of the consolidated situation of an institution as defined in Article 4(1)(47) of Regulation (EU) No 575/2013.

(2) undertakings which are supervised on a consolidated basis by a third country competent authority pursuant to the law of a third country which applies prudential and supervisory requirements that are at least equivalent to those applied in the Union.

(3) undertakings which are not within the scope of points (1) and (2) but which are:

(a) credit institutions;(b) investment firms;

(c) third country credit institutions if the third country applies prudential and supervisory requirements to that institution that are at least equivalent to those applied in the Union;

(d) recognised third country investment firms;

(e) entities which are financial institutions authorised and supervised by the competent authorities or third country competent authorities and subject to prudential requirements comparable to those applied to institutions in terms of robustness where the institution’s exposure(s) to the entity concerned is treated as an exposure to an institution pursuant to Article 119(5) of Regulation (EU) No 575/2013;

(f) entities referred to in points (2) to (23) of Article 2(5) of Directive 2013/36/EU;

(g) entities referred to in Article 9(2) of Directive 2013/36/EU;

(h) insurance holding companies, insurance undertakings, reinsurance undertakings and third country insurance undertakings and third-country reinsurance undertakings where the supervisory regime of the third country concerned is deemed equivalent;

(i) undertakings excluded from the scope of Directive 2009/138/EC (opens EUR-Lex in a new tab)(28) in accordance with Article 4 (opens EUR-Lex in a new tab) of that Directive;

(j) institutions for occupational retirement provision within the meaning of point (a) (opens EUR-Lex in a new tab) of Article 6 (opens EUR-Lex in a new tab) of Directive 2003/41/EC (opens EUR-Lex in a new tab)(29) or subject to prudential and supervisory requirements comparable to those applied to institutions within the meaning of point (a) (opens EUR-Lex in a new tab) of Article 6 (opens EUR-Lex in a new tab) of Directive 2003/41/EC (opens EUR-Lex in a new tab) in terms of robustness;

(k) undertakings for collective investment:

(i) within the meaning of Article 1 (opens EUR-Lex in a new tab) of Directive 2009/65/EC (opens EUR-Lex in a new tab)(30);

(ii) established in third countries where they are authorised under laws which provide that they are subject to supervision considered to be equivalent to that laid down in Directive 2009/65/EC (opens EUR-Lex in a new tab);

(iii) within the meaning of Article 4(1)(a) (opens EUR-Lex in a new tab) of Directive 2011/61/EU (opens EUR-Lex in a new tab)(31) with the exception of:

- undertakings employing leverage on a substantial basis according to Article 111(1) (opens EUR-Lex in a new tab) of Commission Delegated Regulation (EU) 231/2013 (opens EUR-Lex in a new tab) (32) and/or - undertakings which are allowed to originate loans or purchase third party lending exposures onto their balance-sheet pursuant to the relevant fund rules or instruments of incorporation;

(iv) which are authorised as ‘European long-term investment funds’ in accordance with Regulation (EU) 2015/760 (opens EUR-Lex in a new tab)(33);

(v) within the meaning of Article 3 (1)(b) (opens EUR-Lex in a new tab) of Regulation (EU) 346/2013 (opens EUR-Lex in a new tab)(34) (‘qualifying social entrepreneurship funds’);

(vi) within the meaning of Article 3(b) (opens EUR-Lex in a new tab) of Regulation (EU) 345/2013 (opens EUR-Lex in a new tab)(35) (‘qualifying venture capital funds’).

except undertakings that invest in financial assets with a residual maturity not exceeding two years (short-term assets) and have as distinct or cumulative objectives offering returns in line with money market rates or preserving the value of the investment (money market funds);

(l) central counterparties (CCPs) as defined in point (1) (opens EUR-Lex in a new tab) of Article 2 (opens EUR-Lex in a new tab) of Regulation (EU) No 648/2012 (opens EUR-Lex in a new tab)(36) established in the EU and third country CCPs recognised by ESMA pursuant to Article 25 (opens EUR-Lex in a new tab) of that Regulation;

(m) electronic money issuers as defined in point (3) (opens EUR-Lex in a new tab) of Article 2 (opens EUR-Lex in a new tab) of Directive 2009/110/EC (opens EUR-Lex in a new tab)(37);

(n) payment institutions as defined in point (4) (opens EUR-Lex in a new tab) of Article 4 (opens EUR-Lex in a new tab) of Directive 2007/64/EC (opens EUR-Lex in a new tab)(38);

(o) entities the principal activity of which is to carry out credit intermediation activities for their parent undertakings, for their subsidiaries or for other subsidiaries of their parent undertakings;

(p) resolution authorities, asset management vehicles and bridge institutions as defined in points (18), (56) and (59) of Article 2(1) of Directive 2014/59/EU(39) and entities wholly or partially owned by one or more public authorities established prior to the 1 January 2016 for the purpose of receiving and holding some or all of the assets, rights and liabilities of one or more institutions in order to preserve or restore the viability, liquidity or solvency of an institution or to stabilise the financial market.