4.5 Lower amount permission: conditions for allowing a lower level of own funds

Competent authorities should not be prevented from granting a lower amount permission where the own funds requirements calculated in accordance with Article 8(3) of Regulation (EU) 2019/2033 are higher than the own funds requirements calculated in accordance with Article 7 of that regulation at an indicative percentage of at least 125% of the latter, and the investment firm group meets the criteria set out in Section 4.2, or in Sections 4.3 and 4.4. For the purposes of calculating the percentage referred to in this paragraph, competent authorities should ensure that the foreign exchange risk is calculated in the same way for the own funds requirements calculated in accordance with Article 8(3) of Regulation (EU) 2019/2033 and the requirements calculated in accordance with Article 7 of that regulation.

The own funds requirements of any subsidiary undertaking in a third country should be determined at the level of that subsidiary with a satisfactory level of prudence as set out in the following paragraph (notional own funds requirement). The determination should be made by the Union parent investment firm, Union parent investment holding company or Union parent mixed financial holding company, and by any immediate parent undertaking of that third-country subsidiary if required by the competent authority. The own funds should be held at the level of the first parent undertaking in the Union of that third-country subsidiary.

For a satisfactory level of prudence to be ensured, the notional own funds requirements for subsidiary undertakings established in third countries should equal at least the requirements calculated in accordance with Part Three and Part Four of Regulation (EU) 2019/2033. If the European Commission issues an equivalence decision pursuant to Article 47 of Regulation (EU) 600/2014 concerning Regulation (EU) 2019/2033 to the prudential regime of a third country, the capital requirements calculated according to that third-country prudential regime should be considered as having a satisfactory level of prudence. If a parent undertaking of a third country does not hold own funds requirements at least equal to the notional own funds requirements necessary to achieve a satisfactory level of prudence as defined in these guidelines, or at a higher level, if the competent authority has adopted a decision to allow the reduction of own funds requirements to an amount which is higher than the one needed to achieve a satisfactory level of prudence, the lower amount permission should not be granted.

When applying Article 8(4) of Regulation (EU) 2019/2033, competent authorities should not allow a reduction of own funds that would result in the percentage referred to in paragraph 15(a) being lower than the amount specified in paragraphs 12(g), 15(a) or 15(e), as applicable.