EBA published its final guidelines on the treatment of connected clients as defined in the Capital Requirements Regulation (CRR; EU Regulation No 575/2013). These guidelines shall apply from January 01, 2019.
The guidelines clarify that institutions should make use of their clients' consolidated financial statements when assessing the existence of control. They also provide a non-exhaustive list of indicators of control that institutions should use when assessing clients to which EU accounting rules do not apply; these clients could be natural persons, central governments, and clients that prepare consolidated financial statements in accordance with the accounting rules of a third country. Regarding the assessment of interconnections based on economic dependencies, the final guidelines confirm the requirement to consider two or more clients a single risk when funding or repayment difficulties of one client are likely to affect other client. Guidance is also provided on the assessment of situations where control and economic dependency are interlinked and can, therefore, lead to the existence of one group of connected clients, as opposed to two separate groups of connected clients.
The guidelines expect institutions to identify all control relationships and to take reasonable steps to investigate and identify economic dependencies among their clients. The guidelines apply to all areas of the CRR where the concept of group of connected client is used, including the EBA technical standards and the EBA guidelines that refer to that concept. These guidelines aim to support institutions in identifying all possible connections among their clients, particularly when control relationships or economic dependency should lead to the grouping of clients because they constitute a single risk.
Effective Date: January 01, 2019
Keywords: Europe, Banking, Connected Clients, CRR, Large Exposures, EBA
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