Arm’s length conditions

For the purposes of Article 248 of Regulation (EU) No 575/2013, a transaction should be considered to be executed at arm’s length conditions where the terms of the transaction are such as they would be in a normal commercial transaction if:

• (a) the parties had no relationship to each other (including, but not limited to, any special duty or obligation and any possibility to control or influence each other); and
• (b) each party:
• i. acted independently;
• ii. entered into the transaction of its own volition;
• iii. acted in its own interests; and
• iv. did not enter into the transaction on the basis of extraneous considerations which are not directly connected with the transaction in question (such extraneous considerations including, but not being limited to, any reputational risk which might arise in respect of the originator institution or the sponsor institution should it not proceed with the transaction).

In the course of the assessment referred to in paragraph 15, due regard should be given to the information available to each of the parties at the time when the transaction is entered into, and not to such information as becomes available thereafter.