EBA consults on draft regulatory technical standards specifying the different methods of prudential consolidation, which can be applied when certain conditions and criteria are met. The aim of these draft regulatory standards is to ensure that the appropriate method of prudential consolidation is applied to calculate the capital requirements, under the Capital Requirements Regulation (CRR; Regulation (EU) No 575/2013), on a consolidated basis. The consultation runs until February 09, 2018.
The draft regulatory standards have been developed in accordance with the mandate in Article 18(7) of CRR; this article mandates EBA to specify the conditions according 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 also taken into consideration the guidelines on the identification and management of step-in risk, recently published by BCBS and, therefore, includes several indicators that should be assessed by institutions to identify the undertakings that can lead to step-in risk. The current regulatory framework, in terms of scope and the methods of prudential consolidation, is derived from the CRR, in particular Articles 11 and 18. The entities included in the scope of prudential consolidation are institutions such as 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. The draft regulatory technical standards also specify the criteria, indicators, and conditions that institutions need to meet for the application of different methods of consolidation or of the equity method.
Comment Due Date: February 09, 2017
Keywords: Europe, EU, Banking, Prudential Consolidation, CRR, RTS, Consultation, EBA
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.