France – tighter large exposure limit for highly-indebted large NFCs

The measure tightens the large exposure limit applicable to exposures to highly-indebted large non-financial corporations (NFCs) having their registered office in France to 5% of eligible capital. The measure applies to global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) at the highest level of consolidation of their banking prudential perimeter.

An NFC is defined as a natural or legal person under private law having its registered office in France, and which, at its level and at the highest level of consolidation, belongs to the non-financial corporations sector as defined in point 2.45 of Annex A to Regulation (EU) No 549/2013 of the European Parliament and of the Council.

An NFC is considered highly-indebted if it has at its highest level of consolidation:

1. a leverage ratio greater than 100% - the leverage ratio is calculated as the ratio between total debt net of cash and equity; and
2. a financial charges coverage ratio below 3 – the financial charges coverage ratio is calculated as the ratio between:
   1. the value added plus operating subsidies less: (i) payroll; (ii) operating taxes and duties; (iii) other net ordinary operating expenses excluding net interest and similar charges; and (iv) depreciation and amortization, and
   2. interest and similar charges.

The ratios are calculated based on accounting aggregates defined in accordance with the applicable standards, as presented in the NFC’s financial statements, certified where appropriate by a chartered accountant.

A credit institution applies the measure to those of its exposures, where it has an original exposure to the NFC, or to the group of connected NFCs equal to or larger than EUR 300 million as follows:

1. For NFCs which are part of a group of connected NFCs having its registered office at the highest level of consolidation in France, the measure applies to the sum of the net exposures towards the group and all its connected entities;
2. For NFCs which are part of a group of connected NFCs having its registered office at the highest level of consolidation outside France, the measure applies to the sum of:
   1. the exposures to those NFCs having their registered office in France;
   2. the exposures to the entities in France or abroad over which the NFCs referred to in (i) have direct or indirect control; and
   3. the exposures to the entities in France or abroad which are economically dependent on the NFCs referred to in (i).

NFCs which do not have their registered office in France and which are not a subsidiary or an economically dependent entity of, and which are not directly or indirectly controlled by, a NFC having its registered office in France, therefore fall outside the scope of the measure.

Measure Recommendation ESRB/2018/8

Reciprocating countries

Last updated on 7 November 2019

Relevant authorities are recommended to adopt reciprocating measures by no later than six months following the publication of the Recommendation ESRB/2018/8 in the Official Journal of the European Union (1 February 2019).

The following map shows the Member States reciprocating the measure. The map also shows the Member States that chose not to reciprocate the measure in the light of currently non-material exposures. The remaining countries did not notify the ESRB of their intentions.

The following table details each Member State’s reciprocating measure.

[1] De minimis exemption

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