Application of the SREP to cross-border groups
When applying the SREP and these guidelines to cross-border groups, competent authorities should assess the viability of the group as a whole, as well as its individual entities. Consolidating supervisors should perform the initial assessment of the parent undertaking and the group of institutions on a consolidated level, while the other competent authorities should perform the initial assessment of the entities under their supervision (individual, or sub-consolidated, where relevant).
When these guidelines are applied to the subsidiaries of a cross-border group, competent authorities for subsidiaries should, when performing their initial assessment, primarily consider institutions on an individual basis, as they would with a standalone institution. The findings from such initial assessments, where relevant, should also include the identification of key vulnerabilities in the cross-border or group context, and reflect strengths and mitigating factors related to the entity being part of the group.
The results of any such initial assessment of the SREP elements, including, if identified, views on key dependencies on the parent/group, should serve as an input into the joint assessment and decision process pursuant to the requirements of Article113 of Directive2013/36/EU. These results should therefore be discussed by the competent authorities within the framework of the colleges of supervisors established pursuant to Article116 of Directive 2013/36/EU.
In accordance with Article 3 of the Commission Implementing Regulation (EU) No 710/2014, prior to the start of the joint decision process the consolidating supervisor and the relevant competent authorities need to agree on a joint decision timetable setting out steps to be followed in the process and adhere to the agreed timetable throughout the process.
Following the discussions within the colleges of supervisors and the outcomes of the joint assessment process, competent authorities should finalise their respective SREP assessments, making the necessary adjustments based on the outcomes of the college discussions.
Where a competent authority’s assessment revealed specific deficiencies related to intra-group positions negatively affecting the overall viability of the entity on an individual basis, competent authorities should, within the colleges of supervisors, discuss whether the final assessment of an entity should be changed considering the overall group dimension, including the consolidated group business model, strategy and the existence and specific features of intra-group financial support arrangements.
Competent authorities should discuss and coordinate the following within the colleges of supervisors:
planning, including frequency, and timelines for performing the assessment of various SREP elements for the consolidated group and its entities to facilitate preparation of the group risk and liquidity risk reports required for the joint decisions as specified in Article113 of Directive2013/36/EU and in Article 3 of the Commission Implementing Regulation (EU) No 710/2014 taking into account the proportionality and supervisory engagement set out in Title 2;
details of the application of benchmarks used for the assessment of SREP elements;
approach to assessing and scoring subcategories of risks individually, where such subcategories have been identified as material;
inputs required from the institution at consolidated and entity level for conducting the assessment of SREP elements, including those from the ICAAP and ILAAP;
outcomes of the assessment, including the SREP scores assigned to various elements, and the overall SREP assessment and overall SREP score at consolidated and entity level. When discussing the assessment of individual risks to capital and liquidity, competent authorities should focus on the risks that are identified as material for the respective entities;
cross-border prudential implications of ML/TF risks, risks of non-implementation and evasion of targeted financial sanctions and concerns; and
planned supervisory and early intervention measures, if relevant.
When preparing the summary of the overall SREP assessment for the cross-border group and its entities, competent authorities should structure it in a way that will facilitate filling in the templates for the SREP report, group risk report, liquidity risk assessment and group liquidity risk assessment report templates required for the joint decision in accordance with Article113 of Directive2013/36/EU as specified in the Commission Implementing Regulation (EU) No 710/2014.