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    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    January 15, 2021

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive. The guidelines specify the methodology to calculate the total value of assets in EU of the third-country groups and clarifies how to monitor this value to meet the intermediate EU parent undertaking requirement. The guidelines apply to EU-authorized credit institutions and investment firms, which are part of third-country groups and third-country branches. The consultation period on these guidelines ends on March 15, 2021.

    The guidelines stipulate that, in accordance with Article 21b of the Capital Requirements Directive, institutions belonging to third-country groups with a total value of assets in EU of the group equal to or greater than EUR 40 billion must establish an intermediate EU parent undertaking. To take into account the fluctuation in the value of assets, these guidelines specify that the total value of assets in EU of the third-country group should be calculated as an average over the last four quarters. Institutions belonging to third-country groups should monitor the total value of assets in EU on a quarterly basis and communicate the outcomes to relevant competent authorities. In addition, to meet the intermediate EU parent undertaking requirement in a timely manner, they should apply a forward-looking approach by assessing, at least annually, whether the threshold is expected to be breached within the three-year horizon, based on the strategic planning of the third-country group and the projections of assets.

    The guidelines also cover certain procedural aspects related to the monitoring of the threshold by competent authorities and the establishment of the intermediate EU parent undertaking, where necessary. The guidelines clarify that the notifications are to be provided to EBA on an annual basis. For the purpose of both the quarterly assessments and the annual forward-looking monitoring, institutions and branches belonging to a third-country group should exchange all the necessary information with each other. In addition, certain exceptional situations are specified where competent authorities may specify appropriate timelines for the establishment of an intermediate EU parent undertaking, no longer than up to two years from reaching the threshold. Relevant competent authorities should coordinate and take necessary measures to ensure adequate implementation of the intermediate EU parent undertaking requirement.

     

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    Comment Due Date: March 15, 2021

    Keywords: Europe, EU, Banking, Third Country Institutions, CRR, CRD, Intermediate Parent Undertakings, IPU, Reporting, Basel, EBA

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