EBA is consulting on the guidelines on a common assessment methodology for granting authorization as a credit institution under the Capital Requirements Directive (2013/36/EU). The draft guidelines advocate a risk-based approach, consider the proportionality principle for relevant assessment criteria, and are technology neutral, as they apply to traditional as well as innovative business models and/or delivery mechanism. The draft guidelines, which complement the regulatory technical standards on authorization of credit institutions, intend to contribute to the convergence of supervisory practices across the Single Market. The consultation period for these guidelines ends on June 10, 2021 and the guidelines are expected to apply from March 01, 2022.
The guidelines are intended to help competent authorities in the use of the presented common assessment methodology, which aims to ensure the sound and prudent management of credit institutions as of the first day of access to the market. The guidelines are in line with the recent legislative developments, including the focus on the need for the applicant to demonstrate sound and effective risk management pursuant to Article 10, paragraph (2) CRD. The guidelines:
- Draw attention on the importance that the authorization and the related supervisory activity is focused on the entities the purpose of which is to carry on the business as credit institutions and to this purpose also clarify cases, for example, of business restructuring, where an authorization is needed.
- Lay down a thorough and comprehensive methodology to support the competent authorities’ comprehensive understanding of the business model, the risk profile, the geographical distribution of the activities, and the viability and sustainability of the credit institution business undertaking and will form the basis for the determination of the capital at authorization and further prudential requirements.
- Underscore the importance that the organizational structure, internal governance framework, and control be commensurate with the business plan, to ensure that the credit institution will be able to perform the targeted activities in a sound and prudent manner.
- cover the assessment of shareholders and members and the assessment of holders of qualifying holdings in accordance with the criteria set out in Article 23 CRD, as further specified in the Joint ESAs Guidelines in the prudential assessment of qualifying holdings
- Include guidance regarding the money laundering and terrorist financing risks as part of the risks to be considered in the context of the assessment of the application for granting the authorization, along with the importance of cooperation with the anti-money laundering (AML) supervisor and other public bodies, as appropriate in accordance with Article 117(5) CRD.
Comment Due Date: June 10, 2021
Effective Date: March 01, 2022
Keywords: Europe, EU, Banking, CRD, Proportionality, Common Assessment Methodology, AML, Bank Licenses, ML/TF Risk, Capital Requirements, EBA
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