Protection items extended from the head office to its branch

Question

It is understood that legal entities are liable for contractual obligations of their branches and that they may step in under certain circumstances to take over their branches’ activity. Sometimes a protection item (such as a financial guarantee) may be explicitly extended from the head office to its branch. Therefore, should assurances by the head office towards its branches be considered a form of protection that is reported to AnaCredit?

Answer

In accordance with Article 1(24) of Regulation (EU) 2016/867 (hereafter the “AnaCredit Regulation”), “protection” is defined as “… assurance or coverage against a negative credit event, by means of any item listed in the data attribute ‘type of protection’ as defined in Annex IV”.

Furthermore, protection items which have “financial guarantees other than credit derivatives” as the “type of protection” are defined in accordance with Commission Implementing Regulation (EU) No 680/2014.

Therefore, if the protection extended from the head office to its branch comes in the form of financial guarantees and fulfills the definition criteria of “type of protection” item “financial guarantees other than credit derivatives”, such protection items are reported as financial guarantees in AnaCredit.

On the other hand, if such an item does not fulfill this criterion, but the reporting agent considers it to be protection as defined in Article 1(24) of the AnaCredit Regulation, the item is reported, where the data attribute “type of protection” is assigned to in accordance with the specific definitions of protection items in AnaCredit.

Additionally, it should be noted that the legal circumstances under which legal entities are implicitly liable for the contractual obligations of their branches do not imply that this “protection” is reported to AnaCredit.

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See also Protection value for financial guarantees

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