5.1 Activities requiring the application for an authorisation

Pursuant to Directive 2013/36/EU, the protection of savings and of financial stability requires that the carrying out of the activity as a credit institution is subject to a prior authorisation by the competent authority that may only be granted further to the positive assessment of the application submitted by the applicant credit institution.

Competent authorities should assess that the applicant meets all the elements of the definition of a credit institution set out in point (1), letter (a) of Article 4(1) of CRR – ‘an undertaking the business of which is to take deposits or other repayable funds from the public and to grant credit for its own account’. In particular, they should assess that both the activity of ‘taking deposits or other repayable funds from the public’ and of ‘granting credit for its own account’ will be exercised by the applicant credit institution.

This is without prejudice to the possibility for a credit institution to carry out activities set out in Annex I CRD and in accordance with the national law. Competent authorities’ assessment of the business plan should therefore cover all the activities envisaged by the applicant credit institution in the programme of operations, including those that go beyond the taking of deposits or other repayable funds from the public and granting credit on own account, regardless of whether they are set out in Annex I CRD, or further activities pursuant to national law. Competent authorities should examine the consistency and correspondence between the envisaged activities and the internal organisation of the applicant, and the absence of elements that could prevent the effective exercise of their supervisory functions. Along these lines, competent authorities should clarify that, once authorised, the applicant credit institution will be subject to comprehensive scrutiny of all the activities carried out by the credit institution exclusively for the purposes of determining the impact of all such activities on the prudential regulation and supervision of the credit institution as a whole.

Where competent authorities assess that the business model of the applicant credit institution does not meet all the elements of the definition of a credit institution set out in point (1), letter

• (a) of Article 4(1) CRR, they shall refuse to grant the authorisation.

Absent a common EU notion of the elements composing the definition of a credit institution set out in point (1), letter (a) of Article 4(1) of CRR these Guidelines indicate to the competent authorities core aspects of such elements as well as areas requiring competent authorities’ special attention when assessing the application.

When assessing whether the expression ‘the business of which’ is met, competent authorities should assess that the combination of both activities of ‘taking deposits or other repayable funds from the public’ and ‘granting credit for its own account’ will be performed on a regular and systematic basis.

Pursuant to the general principle of protection of savings, when assessing whether the expression ‘”take” deposits or other repayable funds from the public’ is met, competent authorities should make sure, among other things, that the applicant credit institution’s business model (and thus its funding structure) covers receiving and/or holding such deposits and other repayable funds until repaid in full. Repayment in full relates to the principal amount with any accrued interests, if any.

When assessing whether the expression ‘deposits’ is met, competent authorities should focus their attention at least on ensuring that they are:

• a. a sum of fiat currency in whatever form (such as coins, notes, scriptural money, etc.);
• b. repayable on demand or at a contractually agreed point in time and with or without interest or a premium;
• c. received from third parties (legal or natural persons);
• d. received in the course of carrying on the activity by way of business.

Competent authorities should also note that deposits may take several forms, they may be transferable, or other deposits, including savings deposits, fixed-term deposits or non-negotiable certificates of deposit.

Competent authorities should also ensure, among other things, that the exclusions to the notion of eligible deposit and the repayment obligation by the deposit guarantee scheme as set out in Article 5(1) of Directive 2014/49/EU on deposit guarantee schemes (‘DGSD’) do not affect the notion of ‘deposits’ for the purposes of the granting of the authorisation as a credit institution.

When assessing whether the specific expression ‘other repayable funds’ is met, competent authorities should refer to ‘financial instruments which possess the intrinsic characteristic of repayability’ as well as ‘those which, although not possessing that characteristic, are the subject of a contractual agreement to repay the funds paid’¹⁵ . They should also take into account that such a notion should include bonds and other comparable securities such as negotiable certificates (not nominative) of deposit, provided these are continually issued by the credit institution¹⁶ .

¹⁵ Court of Justice, 12 February 1999, C-199/97, Romanelli .

¹⁶ Recital 14 CRD reads ‘The scope of measures should therefore be as broad as possible, covering all institutions whose business is to receive repayable funds from the public, whether in the form of deposits or in other forms such as the continuing issue of bonds and other comparable securities […]’ (emphasis added).

When assessing whether the deposits or other repayable funds are taken ‘from the ‘public’, competent authorities should focus in particular on whether ‘deposits or other repayable funds’ are received as a business from legal or natural persons other than the credit institution.

When assessing whether the expression ‘to grant credit’ is met, competent authorities should focus in particular on whether the applicant credit institution will conclude agreements for the provision of a sum of money for a specified or unspecified purpose, for a period of time to be agreed, and to be repaid in accordance with agreed conditions, usually providing for remuneration. With specific regard to the expression ‘for its own account’, competent authorities should assess whether the applicant credit institution envisages being the creditor of the granted financing.

As part of the assessment for granting the authorisation as a credit institution, competent authorities should also consider whether the granting of an authorisation as a credit institution is required by the underlying situation and current circumstances of the applicant credit institution. They should assess the adequacy and necessity of the authorisation as a credit institution, having regard to the activities that the applicant credit institution intends to carry out.

Where, based on the information submitted with the application, it is not completely clear that conducting business as a credit institution is the applicant credit institution’s actual business intention, competent authorities should increase the level of scrutiny of the application. This is particularly the case where they detect limited or formal compliance with the individual components of the definition of a credit institution.

In such circumstances competent authorities should examine the applicant credit institution’s possible additional business motives supporting the submission of the application, such as the benefits deriving from the status of credit institution in terms of reputation, access to payment and settlement systems and cheaper funding. Competent authorities should, among other things, put particular emphasis on the level of risk of the intended activities and the viability of the business model, having also regard, among other things, to the potential negative effects on the deposit guarantee schemes and the amount and quality of collateral stored at the central banks.