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EBA published final draft technical standards specifying the methods of prudential consolidation

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15 April 2021

The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR). The aim of these draft RTS is to ensure that the appropriate method of prudential consolidation is applied for the calculation of the CRR requirements on a consolidated basis. Compared to the Consultation Paper, the final draft RTS have been revised also to reflect the amendments introduced as part of the Risk Reduction Measures Package adopted by the European legislators.

These final draft RTS specify the conditions for the application of the different methods of prudential consolidation. Entities to be included in the scope of prudential consolidation are, in particular, institutions, financial institutions and ancillary services undertakings.

Following the approval of the Risk Reduction Measures Package, these draft RTS have been revised in order to reflect the changes introduced in the CRR and in the Capital Requirements Directive (CRD), as well as the feedback received during the public consultation. In particular, the main changes deal with the newly introduced Article 18(8) of the CRR, allowing competent authorities to extend prudential consolidation also to certain non-financial undertakings in case there is a substantial risk of step-in. In this regard, building on the initial proposal presented in the Consultation Paper, these draft RTS include several step-in risk indicators to be taken into account by competent authorities in assessing whether an undertaking should be fully or proportionally consolidated for prudential purposes.

Legal basis and next steps

These draft RTS have been developed according to Article 18(9) of Regulation (EU) No 575/2013 (CRR), which mandates the EBA to ‘specify conditions accordance with which consolidation shall be carried out in the cases referred to in paragraphs 3 to 6 and paragraph 8’ of Article 18 of this Regulation. The final standards have been sent to the European Commission for their adoption as EU Regulations that will be directly applicable throughout the EU.

These RTS have taken into consideration also the Guidelines on the identification and management of step-in risk published by the Basel Committee on Banking Supervision (BCBS) and, therefore, include several indicators that should be assessed in order to identify the undertakings that can lead to step-in risk. 

DOCUMENTS

Final draft RTS on methods of prudential consolidation under Article 18 of CRR

LINKS

Regulatory Technical Standards on methods of prudential consolidation

Accounting and auditing

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