SREP capital assessment and institution-specific prudential requirements
The determination of capital adequacy, and related requirements and guidance in accordance with the process described in Title7 for cross-border groups is part of the competent authorities’ joint decision process pursuant to Article113 of Directive2013/36/EU.
For parent or subsidiary institutions of a cross-border group, the application of P2R and P2R-LR pursuant to Article104(1)(a) of Directive2013/36/EU should be carried out in accordance with the joint decision process provided for in Article 113(1)(a) of that Directive.
In the context of discussions on the adequacy of the level of own funds and determining P2R and P2R-LR, competent authorities should consider:
the assessment of the materiality of risks and deficiencies identified at both consolidated and individual entity level (i.e. which risks are material to the group as a whole and which are material to just one entity) and the level of own funds required to cover such risks;
where deficiencies identified are common across all entities (e.g. same governance deficiencies present in all entities, or deficiencies in the models used across several entities), coordinating the assessment and supervisory response, and in particular, deciding whether measures should be imposed at a consolidated level or proportionally at entity level for the entities where common deficiencies are present;
outcomes of ICAAP assessments and views on the reliability of ICAAP calculations and their possible use as an input in determining P2R;
outcomes of the supervisory benchmark calculations used to determine P2R for all entities within the group and at a consolidated level;
P2R to be imposed on entities and at a consolidated level to ensure there is consistency of final own funds requirements and whether there is a need for transferring own funds from consolidated to entity level.
To determine the TSCR as specified in Title7, competent authorities should consider the same level of application as the joint decision requirements in accordance with Article 113(1)(a) of Directive 2013/36/EU. In particular, the TSCR and other capital measures, if applicable, should be set at consolidated and solo levels for entities operating in other Member States. For the sub-consolidated level, the TSCR and other capital measures should cover only the parent undertaking of the sub-consolidated group to avoid double counting of P2R considered by competent authorities for subsidiaries in other Member States.
If the outcome of the supervisory assessment of the risk of excessive leverage for the parent or subsidiary institutions of a cross-border group is that Pillar 2 requirements to address the risk of excessive leverage P2R-LR should be set, this should be carried out in accordance with the joint decision process provided for in Article 113(1)(a) of the CRD and should reflect the separate stack of own funds requirements based on the leverage ratio.
In the context of the discussions on the adequacy of the level of own funds to cover the risk of excessive leverage and determining P2R-LR, competent authorities should consider:
aspects included in paragraph 3266;
Pillar 2 requirements to cover the risk of excessive leverage imposed on entities and at a consolidated level to ensure there is consistency of final own funds requirements and whether there is a need for transferring own funds from consolidated to entity level.
All the relevant information regarding the determination of P2G and P2G-LR for parent or subsidiary institutions of a cross-border group should be shared among competent authorities, and their setting should be carried out in accordance with the joint decision process pursuant to Article 113(1)(c), of Directive 2013/36/EU. In particular, competent authorities should discuss the approach to establishing P2G and P2G-LR at solo level where no data from the supervisory stress tests are available at that level, or, where relevant, agree on the application of P2G and P2G-LR at consolidated level only. The P2G and P2G-LR should be duly reflected in the joint decision document prepared in accordance with Article 113 of Directive 2013/36/EU.