The European Banking Authority (EBA) launched today a consultation on draft Regulatory Technical Standards (RTS) specifying the different methods of prudential consolidation, which can be applied when certain conditions and criteria are met. The aim of these draft RTS is to ensure that the appropriate method of prudential consolidation is applied for the calculation of the Capital Requirements Regulation (CRR) requirements on a consolidated basis. The consultation runs until 09 February 2018.
According to the CRR, the entities included in the scope of prudential consolidation are institutions (i.e. credit institutions and investment firms), financial institutions and, when consolidated supervision is required, ancillary services undertakings.
As a general rule, institutions shall apply full consolidation to their subsidiaries, or, where relevant, to the subsidiaries of their parent financial holding company or parent mixed financial holding company. However, under certain circumstances, and depending on the links between the entities, the CRR allows the application of other methods of consolidation, such as proportional consolidation. In addition, when consolidation is not appropriate the equity method may also be applied. These draft RTS specify the criteria, indicators and conditions that institutions need to meet for the application of different methods of consolidation or of the equity method.
The EBA, in parallel, published an Opinion and a Report on the prudential treatment of other financial intermediaries (OFIs) and regulatory perimeter issues, highlighting the diversity in terms of application of the definition of financial institution and ancillary services undertakings, which currently exists. As these terms are crucial for the purposes of establishing the scope of prudential consolidation, the Consultation Paper on these draft RTS also seeks feedback on this issue.
Comments to this consultation can be sent to the EBA by clicking on the “send your comments” button on the consultation page. Please note that the deadline for the submission of comments is 09 February 2018. All contributions received will be published following the end of the consultation, unless requested otherwise.
A public hearing will take place at the EBA premises on 22 January 2018 from 13.30 to 15.30 UK time.
These draft RTS have been developed according to Article 18(7) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR), which mandates the EBA to specify the conditions ac-cording to which consolidation shall be carried out in the cases referred to in paragraphs 2 to 6 of Article 18 of the CRR.
The Consultation Paper has taken into consideration the Guidelines on the identification and management of step-in risk
, recently published by the Basel Committee on Banking Supervi-sion (BCBS) and, therefore, includes several indicators that should be assessed by institutions to identify the undertakings that can lead to step-in risk.
- Barclays PLC
- Deutsche Börse Group
- FRENCH BANKING FEDERATION (FBF)
- Leaseurope & Eurofinas
- National Association of German Cooperative Banks (BVR)
- Pan-European Conglomerate Club
- Spanish Banking Association (AEB)
- Standard Chartered