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Articles 77-78 CRR – Pre-approval of reduction of own funds instruments

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Credit institutions must receive approval from the competent supervisory authority for the reduction of own funds instruments.

The rules for the (pre-)approval for the reduction of own funds instruments are set out in Articles 77 and 78 of Regulation (EU) No 575/2013 (CRR). A further clarification is made in Articles 27 to 32 of the Delegated Regulation on Own Funds Requirements (CDR 2014/241/EU, abbrev.: CDR-OF).

In accordance with these provisions credit institutions must receive approval from the supervisory authority for the reduction of own funds instruments. A timeframe of three months shall generally apply for this procedure from the date of submission of the complete application.

In the case of groups of institutions, this obligation to obtain an authorisation at every level upon which the prudential requirements shall be applied, i.e. both on a consolidated basis as well as on an individual basis as well as in certain instances on a sub-consolidated basis.

According to Article 29 CDR-OF the competent authority may pre-approve the measures listed in Article 77 CRR for the reduction of own funds instruments (reduction, repurchase, redemption, call or repurchase of own funds instruments) subject to specific requirements being satisfied, for specific purposes and within specific or pre-defined limits. This may apply in the following scenarios:

  • Repurchases for market making purposes (Article 29 para. 3 CDR-OF),
  • Reductions for the purposes of being passed on to employees as part of their remuneration (Article 29 para. 4 CDR-OF),
  • “immaterial” (de minimis) reduction measures (Article 29 para. 5 CDR-OF).

The downloads below provide a brief overview of the FMA procedure intended for this purpose including the general and specific application requirements.

 

Downloads / CDR:

 

 

 

 

 

Further information