The BBA does not agree with the proposed coverage because the level of detail required in plans is not proportionate to the risk a legal entity or branch poses to the economy.
The proposed wording implies that a bank will have to provide detailed information on some entities that are of no systemic importance.
The article 7 criteria are subjective and unlikely to be interpreted consistently by different firms, or by different competent authorities. So the basis for identifying group-relevant entities, proposed in the CP, is likely to lead to disagreements between firms and their competent authorities and, more importantly, between different competent authorities.
The overall framework will be more consistent and coherent if the definition of ‘group-relevant’ is based on whether an entity provides critical services that support critical functions, as defined in EBA/Op/2015/05.
We suggest the following change to paragraph 17 of the Draft recommendations (page 12 of the CP):
Current version in EBA/CP/2017/03: The Union parent undertaking should designate as relevant for the group any entity which meets the conditions of Article 7 (2) (a-e) of Commission Delegated Regulation (EU) 2016/1075, regardless of the relevance of this entity for the economy, including for the financial system, of any Member State.
Suggested change: The Union parent undertaking should designate as relevant for the group any entity which provides a critical service to a group entity which provides a critical function to the economy of any Member State.
The term ‘locally relevant’ may be mis-understood. We suggest that ‘economically relevant in the EU’ is clearer.
To avoid different interpretations, we suggest simplifying the criteria for relevance to be ‘a legal entity or branch which provides a critical function to the economy of any Member State’.
We would agree with the coverage of ‘non-relevant’ if our suggestions on questions 1 and 2 were adopted.
We expect that if more objective criteria are adopted (as per our answers to questions 1 and 2) then the shortfalls discussed in section 7 will be very rare.
We welcome the transitional phase envisaged in paragraph 11.