Opinion of the European Banking Authority on matters relating to the perimeter of credit institutions:Definition of ‘credit institution’

Opinion of the European Banking Authority on matters relating to the perimeter of credit institutions

Definition of ‘credit institution’

Geldend

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The term ‘credit institution’ is defined in point (1) of Article 4(1) of the CRR as follows:

‘credit institution’ means an undertaking the business of which is to take deposits or other repayable funds from the public and to grant credits for its own account.

The key terms ‘deposits’, ‘other repayable funds’, ‘grant credits’, 'from the public' are not defined in the CRR. Therefore, notwithstanding the inclusion of the definition in a maximum harmonising Regulation,8. there remains a degree of variation between the Member States as to the interpretation of the term ‘credit institution’ and therefore the entities to which the requirement to obtain a banking licence (and therefore the requirements of the CRDIV9./CRR) applies in the Member States.

The EBA observes that the term ‘credit institution’ is of significance not only for the purposes of determining the entities subject to authorisation and prudential requirements under the CRDIV/CRR but also the entities within the scope of the DGSD (recast) (Directive 2014/49/EU), the Bank Recovery and Resolution Directive (Directive 2014/59/EU), the Single Supervision Mechanism (Regulation (EU) No 1024/2013) and the Single Resolution Mechanism (Regulation (EU) 806/2014). In light of the weight placed on this term the EBA notes that it is of considerable importance that it is interpreted in a uniform manner across the Union.

Although it is not clear from the responses received from the competent authorities whether the existing variations in the interpretation of the term ‘credit institution’ are, in practice, material as regards the number and types of entities which are classified as credit institutions in the Member States, in the EBA’s opinion the fact that there is a risk that the term could be interpreted in an inconsistent way contradicts the very foundation of the single rulebook. In particular, this poses a risk to the consistent application of critical legally binding Union acts intended to protect consumers and investors, enhance financial stability and rebuild trust in the financial system. For this reason the EBA urges the Commission to give consideration to possible clarifications to the definition of ‘credit institution’.

The EBA provides in the report some observations as to possible approaches to the clarification of the term ‘credit institution’. These are based on the responses received from the competent authorities. In particular, to support the homogenous interpretation of the term consideration should be given to the development of a definition of:

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‘deposit’ (this could include the following core components: a sum of money; repayable on demand or at a contractually agreed point in time (but otherwise repayment of the principal is unconditional) and with or without interest or a premium; received from third parties [legal or natural persons]; and received in the course of carrying on the activity by way of business, and be subject to a number of exclusions, for example monies referable to the provision of property or services (for example, advance payments under a contract for the sale, hire or other provision of property or services which are repayable only in the event that the property or services are not in fact sold, hired or otherwise provided) or the giving of security could be excluded from the scope of the definition);

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‘other repayable funds’ (this could be defined to include ‘bonds and other comparable securities such as negotiable certificates of deposit’ providing these are continually issued by the entity concerned).

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