European Banking Authority Consults on Connected Clients under the Capital Requirements Regulation 

The European Banking Authority published a consultation paper proposing an updated version of the guidelines on the implementation of the large exposures regime that was issued by the Committee of European Banking Supervisors on December 11, 2009. The large exposures regime has since been amended by the Capital Requirements Regulation and complemented by European Commission and EBA guidelines. In light of the CRR amendments, the EBA has reviewed and updated the 2009 CEBS Guidelines and presented the results of the review in the consultation paper.

The draft guidelines focus on the issue of connected clients and take into account developments in the area of shadow banking and large exposures, both at EU and international level. The draft guidelines focus on control relationships and economic dependencies, which lead to the formation of groups of connected clients. Institutions should make use of their clients’ consolidated financial statements when assessing connections. Guidance is provided on the use of an alternative approach under the CRR for assessing the existence of groups of connected clients of entities directly controlled by, or directly interconnected with, central governments (or, where applicable, regional or local governments).  The draft guidelines also develop the non-exhaustive list of situations of economic dependency (previously included in the CEBS Guidelines) and clarify situations where control and economic dependency are interlinked or can create one group of connected clients rather than two separate groups of connected clients. Lastly, the draft guidelines set out the control and management procedures to identify connected clients. The EBA noted that the draft guidelines are consistent with the supervisory framework for measuring and controlling large exposures issued by the Basel Committee on Banking Supervision in April 2014. 

A public hearing on the consultation will be held on September 5, 2016 and responses to the consultation paper are due by October 26, 2016.

View the consultation paper.