The EBA publishes a Report on prudential consolidation and final Guidelines on ancillary services undertakings

The European Banking Authority (EBA) today released its Report on prudential consolidation and the final Guidelines on ancillary services undertakings (ASU) under the Capital Requirements Regulation (CRR). Both publications are designed to enhance the efficiency and proportionality of the prudential consolidation framework, promote a level playing field, foster convergence of supervisory practices among institutions and competent authorities, and improve comparability of prudential requirements across the EU.

Report on prudential consolidation

The Report on prudential consolidation puts forward targeted recommendations that may support the European Commission in considering further legislative adjustments to the EU regulatory framework. It also clarifies several areas where recent EBA investigations have identified implementation challenges across EU institutions.

These recommendations and clarifications aim to enhance the efficiency and proportionality of the prudential consolidation framework, improve the clarity and internal consistency of key definitions and provisions, and ensure harmonised and consistent application of the consolidation framework across institutions.

Key elements include:

• Simplification of sub-consolidation requirements, to reduce complexity for groups with multiple consolidation layers.
• Improved alignment with accounting standards, both in terms of undertakings included within the scope of consolidation and relevant methods to be applied.
• Refinement of the definition of control, to ensure consistent interpretation and convergence across jurisdictions.
• Further clarity on how to determine the perimeter of prudential consolidation, especially when an insurance undertaking within a bank-led financial conglomerate acquires a financial institution and the so-called ”Danish compromise“ (Article 49 of the CRR) is applied by the parent institution.

Guidelines on ancillary services undertakings

The Guidelines on ancillary services undertakings set out clear, simple and consistent criteria for identifying activities falling within the definition of ancillary services undertakings under Article 4(1)(18) of the CRR, namely: (a) activities considered a “direct extension of banking”, (b) activities “ancillary to banking”, and (c) “other similar activities”.

The provided criteria are designed to help institutions and competent authorities identify undertakings performing relevant activities – such as operational leasing, ownership or management of property or data processing services - as ancillary services undertakings. This assessment is essential for determining the scope of prudential consolidation and the application of prudential requirements.

The Guidelines also address innovative and digital business models, including fintech and technology-driven services, which may introduce new forms of ancillary risks within banking groups.

Overall, the Guidelines aim to promote a level playing field, foster convergence of supervisory practices among institutions and competent authorities, and enhance comparability of prudential requirements across the EU.

Legal basis and background

The Report on prudential consolidation has been developed according to Article 18(10) of Regulation (EU) No 575/2013, which mandates the EBA to submit a Report to the European Commission on the completeness and appropriateness of the definitions and provisions of this Regulation.

The Guidelines on ancillary services undertaking have been developed according to Article 4(5) of Regulation (EU) No 575/2013, which mandates the EBA to specify the criteria for the identification of activities referred to in paragraph 1, first subparagraph, point (18) of this Article.