Response to consultation on RTS on methods of prudential consolidation

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Question 1: Are there undertakings which do not comply with the definition of a financial institution or ancillary services undertaking of Regulation (EU) 575/2013 which should be included in the prudential scope of consolidation? Please explain and provide examples of these entities.

CSDs shall be included explicitly in the prudential consolidation due to their custody business that corresponds to the activity listed in Annex I number 12 CRD IV. The implicit inclusion as financial institution seems not to be appropriate. In contrast, in order to ensure that several regulated financial service undertakings do not fall unintendedly under the definition of financial institution or ancillary service undertaking as a consequence of their activities, these undertakings shall be excluded explic-itly from the scope of prudential consolidation. In detail, these entities are i.a. payment systems, securities settlement systems, central counterparties, trade repositories, regulated markets, data reporting services providers, index providers, market operators and rating agencies. In case one undertaking is classified as credit institution or investment firm, any additional activity shall not lead to any such exclusion form consolidated supervision.
In addition, Article 2 of the draft RTS gives a definition of ‘undertakings’. Following this definition, ‘undertakings’ also include ancillary service undertakings being part of the prudential consolidation. Including ancillary service undertakings according to Article 18 Paragraph 8 CRR for the prudential consolidation seems reasonable. Asset management companies are also referred to in the aforementioned paragraph but are not considered in the current draft RTS. We kindly ask EBA to validate its approach against Article 18 Paragraph 8 CRR.

Question 2: Do you consider SSPEs financial institutions? When SSPEs are consolidated for accounting purposes, do you also consolidate them for prudential purposes? Please differentiate in your answer between the situation when SRT is met and when it is not met (the institution originates the securitisation); and when the institution acts as an investor on the securitisation vehicle (whether this is a SSPEs or a special purpose entity used to set up securitisations) or sponsors the securitisation transaction.

NA

Question 3: Do you currently use the method of proportional consolidation for the consolidation of subsidiaries in accordance with Article 18(2) of Regulation (EU) No 575/2013? If proportional consolidation is used, please explain if the conditions included in Consultation Paper are met.

NA

Question 4: Do you have any comment on the conditions established in this Consultation Paper to apply proportional consolidation pursuant to Article 18(2) of Regulation (EU) No 575/2013?

NA

Question 5: Do you agree on the criteria for the determination of the consolidating entity? Do you experience a different situation currently?

NA

Question 6: Do you have any comment on the elements included in this Consultation Paper for the application of the ‘aggregation method’ pursuant to Articles 18(3) and (6)(b) of Regulation (EU) No 575/2013? Please explain.

Article 9 Paragraph 1 of the draft RTS obliges institutions (meeting certain conditions) to set up consolidated financial statements (“(…) shall prepare consolidated financial statements (…)”). As already stated above, institutions shall not be forced by regulatory requirements preparing consolidated financial accounts for statutory purposes. We further refer to our proposal described in Part C of our response.

Question 7: Do you have any comment on the application of proportional consolidation according to Article 18(4) of Regulation (EU) No 575/2013?

NA

Question 8: Do you have any comment on the criteria established in this Consultation Paper on the prudential treatment of other participations or capital ties (including the equity method) under Article 18(5) of Regulation (EU) No 575/2013? Please explain.

NA

Question 9: Do you agree with the impact assessment and its conclusions? Please provide any additional information regarding the costs and benefits from the application of these draft RTS.

NA

Question 10: Please provide any additional comments on the Consultation Paper.

NA

Name of organisation

Deutsche Börse Group