5. 6. Assessment of the minimum capital endowment requirement

Competent authorities should ensure that the envisaged TCB will hold at authorisation the applicable minimum fixed capital endowment referred to in Article 48e(1), points (a) or (b) CRD, depending on whether the applicant TCB is categorised as class 1 or class 2, based on the competent authority’s overall assessment of the application against the elements listed in Article 48a(1) and (2) CRD. Along the same lines, the minimum capital endowment should cover the average of the projected liabilities for the three-year business plan time horizon.

Competent authorities should satisfy themselves of the eligibility of the instruments composing the capital endowment, in particular that they are available for unrestricted and immediate use by the TCB to cover risks or losses as soon as those risks or losses occur and that they are suitable to be deposited in escrow in accordance with Article 48e(3) CRD, in accordance with the requirements set out Article 48e(2) CRD and with the draft EBA Guidelines on the instruments meeting requirements for the capital endowment .

For this purpose, competent authorities should also review the draft contract(s) to deposit the eligible assets in escrow in accordance with Article 48e(3) CRD, in particular they should verify that the ‘ escrow account is held in the Member State where the branch is authorised with a credit institution that is not part of its head undertaking’s group or, where permitted under national law, with the central bank of the Member State ’ . Furthermore, taking into account the minimum operational requirements set out in the draft EBA Guidelines on the instruments meeting requirements for the capital endowment, competent authorities should assess that the contractual provisions ensure compliance with the minimum capital endowment requirement at all times and the availability of such eligible instruments in case of resolution or winding-up of the third-country branch in accordance with Article 48e(3) CRD.

Competent authorities should review that the origin of the instruments is legitimate and that adequate arrangements are in place to ensure that they are held on the TCB books.

Competent authorities should verify that the applicant head undertaking has deposited the eligible instruments meeting the capital endowment requirement in the escrow account. Where such eligible instruments have not yet been deposited in part or in total at the time of the submission of the application for authorisation, competent authorities should ensure that the applicant head undertaking has committed in the application for authorisation to deposit such eligible instruments at the latest prior to the moment when the authorisation to establish a TCB, where granted, becomes effective in accordance with national law.