The European Banking Authority (EBA) published the final report on the guidelines on a common assessment methodology for granting authorization as a credit institution. This is the first guidance addressed to all competent authorities across the European Union that are in charge of granting authorization as a credit institution. The guidelines clarify that, while all authorization requirements have to be met for granting authorization, competent authorities may impose conditions precedent, obligations subsequent, and restrictions, and may specify their supervisory expectations at the time of the authorization, provided that the conditions set out in the guidelines are met.
The guidelines draw attention to the importance of the authorization and the related supervisory activity being focused on those entities, the purpose of which is to truly carry on the business as credit institutions; to this end, they also clarify cases—for example business restructuring—where authorization is needed. The guidelines also
- cover the authorization requirements set out in the Capital Requirements Directive (CRD).
- advocate for a risk-based approach.
- consider the proportionality principle for all relevant assessment criteria.
- are technology neutral and thus apply to both traditional and innovative business models and/or delivery mechanisms.
- align with the regulatory technical standards on information for authorization and underscore the importance of consistency with the supervisory approaches applied to going concerns.
- include guidance on money laundering or terrorist financing (ML/TF) risks and highlight the importance of cooperation with the anti-money laundering (AML) supervisor and other public bodies, in accordance the CRD.
To foster convergence with respect to the assessment of the business plan, the guidelines lay down a thorough and comprehensive methodology that will 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; this will form the basis for the determination of the capital at authorization and further prudential requirements. Similarly, the guidelines underscore the importance of the organizational structure, internal governance framework, and control being 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. To assess compliance with the internal governance requirements, the common assessment methodology provides guidance on the main elements and aspects to be assessed. The guidelines clarify that this is without prejudice to the application of additional parts of the relevant applicable regulatory sources and specify that the competent authorities’ assessment should aim to ensure compliance of the credit institution with the referred regulatory sources.
Keywords: Europe, EU, Banking, CRD, CRR, AML, Regulatory Capital, Governance, Bank Licenses, Basel, EBA
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