ESRB adopted a recommendation (ESRB/2018/8) that seeks to ensure that the 5% large exposure (LE) limit of France applies not only to exposures of systemically important institutions (SIIs) authorized in France, but also to exposures of SIIs authorized in other EU member states. It thereby enhances the effectiveness and consistency of macro-prudential policy in the EU and contributes to a level playing field in the Single Market. The Recommendation ESRB/2018/8 was published in the Official Journal of the European Union on February 01, 2019. The measure applies from July 01, 2018 to SIIs authorized in France at the highest level of consolidation of their banking prudential perimeter.
This large exposure limit is for exposures of SIIs to highly indebted large non-financial corporations having their registered office in France. After considering the cross-border implications of this measure, the General Board of ESRB decided on December 05, 2018 to include the French measure in the list of macro-prudential policy measures to be reciprocated under Recommendation ESRB/2015/2. Relevant authorities are recommended to adopt reciprocating measures no later than six months following the publication of Recommendation ESRB/2018/8 in the Official Journal of the European Union. If the same macro-prudential policy measure is not available in their jurisdiction, relevant authorities are recommended to apply a macro-prudential policy measure available in their jurisdiction that has the most equivalent effect and to adopt the equivalent measure after consulting ESRB.
Upon the reciprocation of this measure, SIIs will have to apply a 5% large exposure limit to their exposures to any highly indebted non-financial corporation or group of connected non-financial corporations residing in France to which their original exposure is equal to or exceeds EUR 300 million. An NFC is considered highly indebted if it has, at its highest level of consolidation, a leverage ratio greater than 100% and a financial charges coverage ratio below 3. Non-financial corporations that do not have their registered office in France and that are not a subsidiary or an economically dependent entity of, or directly or indirectly controlled by, a non-financial corporation having its registered office in France fall outside the scope of the measure.
Effective Date (recommended): August 01, 2019
Keywords: Europe, EU, France, Banking, Large Exposures, Recommendation ESRB/2018/8, SII, Systemic Risk, Macro-prudential Policy, ESRB
Previous ArticleAPRA Consults on Final Phase Margin Rules for Uncleared Derivatives
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.