EBA Publishes Final Guidance on Treatment of Connected Clients
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.
Related Links
Effective Date: January 01, 2019
Keywords: Europe, Banking, Connected Clients, CRR, Large Exposures, EBA
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.