LUXEMBOURG: CSSF Publishes Circular CSSF 22/791

The CSSF has published Circular CSSF 22/791 specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits of Article 395(1) of Regulation (EU) No 575/2013 and the time and measures to return to compliance pursuant to Article 396(3) of Regulation (EU) No 575/2013 (EBA/GL/2021/09).

The purpose of the circular is to inform credit institutions that the CSSF, in its capacity as competent authority, applies the Guidelines of the European Banking Authority (the “EBA”) specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits of Article 395(1) of Regulation (EU) No 575/2013 (the “CRR”) and the time and measures to return to compliance pursuant to Article 396(3) of the CRR (EBA/GL/2021/09) (the “Guidelines”), published on 15 September 2021. Consequently, the CSSF has integrated the Guidelines into its administrative practices and regulatory approach with a view to promote supervisory convergence in this field at the European level.

The Guidelines are issued by the EBA in accordance with the mandate set out in Article 396(3) of the CRR and apply as from 1st January 2022.

The Guidelines specify under Section 4.2 the information that the concerned institutions should provide to the competent authority when reporting a breach of the large exposure limit in accordance with Article 396(1) of the CRR, as well as under Section 4.4 certain obligations of the concerned institutions in connection with the measures to be taken to ensure the timely return to compliance with the limits of Article 395(1) of the CRR.

The Guidelines also specify the criteria that competent authorities should use to assess the exceptional cases referred to in Article 396(1) of the CRR and where a competent authority allows an institution to exceed the limits set out in Article 395(1) of the CRR. In addition, the Guidelines set out the criteria that competent authorities should use to determine the appropriate timeframe for an institution to return to compliance with the large exposure limits of Article 395(1) of CRR, and the measures to be taken to ensure the timely return to compliance with those limits.

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