Tennet Netherlands obtains 0% risk weight status for prudential capital treatment

De Brauw advised TenneT Netherlands B.V. on a decision by the Dutch central bank allowing credit institutions to treat exposures to TenneT as exposures to the Dutch central government. TenneT is the first Dutch company to obtain this status and to be included on the European Banking Authority's list.

The Capital Requirements Regulation imposes strict own funds requirements on credit institutions. The size of the required own funds depends on factors including the credit risk weight attributed to the credit institution's assets. Under the standardised approach, this is expressed in a risk weight ranging from 0% to 1250%. For exposures to corporate entities, the lowest risk weight is 20%. However, for public sector entities this could be as low as 0% if the national competent authority in a member state finds that the exposure to the entity carries the same risk as exposure to the central government due to the existence of an appropriate guarantee.

De Brauw advised TenneT Netherlands B.V. on its classification as a public sector entity and on the treatment of the state guarantee provided to TenneT Netherlands B.V. for the purposes of the Capital Requirements Regulation. Following this advice, the Dutch central bank decided that TenneT indeed meets the criteria. This means that any credit institution that has exposure to TenneT Netherlands B.V. and uses the standardised approach may now weigh this risk as being equal to central government exposure (namely 0%).