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. This can be done by dividing the process into two stages: (1) competent authorities make an initial assessment of entities under their direct supervision, and (2) competent authorities jointly discuss and finalise the assessment within the framework of colleges of supervisors pursuant to the requirements of Articles 113 and 116 of Directive 2013/36/EU.
consolidating supervisors should perform the initial assessment of the parent undertaking and the group of institutions on a consolidated level; and
competent authorities should perform the initial assessment on the entities under their supervision (individual, or sub-consolidated, where relevant).
Where these guidelines are applied to the subsidiaries of a cross-border group as specified in the paragraph above, competent authorities for subsidiaries should, when performing their initial assessment, primarily consider institutions on an individual basis, i.e. assess the business model, strategy, internal governance and institution-wide controls, risks to capital and liquidity, and capital and liquidity adequacy of an entity as they would a standalone institution. The findings from such initial assessments, where relevant, should also include identification of key vulnerabilities in the cross-border or group context, which may be related to the reliance of an institution on its parent/group for funding, capital, technological support, etc. In their initial assessments made on an individual basis, competent authorities should also reflect strengths and mitigating factors related to the entity being part of the group, which may be related to group technological support, financial support arrangements, etc.
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 Article 113 of Directive 2013/36/EU, and should therefore be discussed by the competent authorities within the framework of the colleges of supervisors established pursuant to Article 116 of Directive 2013/36/EU.
Following the discussions within the framework of colleges of supervisors and 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 initial assessment has revealed specific deficiencies related to intra-group positions (e.g. high concentration of exposures to the parent undertaking, reliance on intra-group funding, concerns about the sustainability of an entity’s strategy, etc.) negatively affecting the overall viability of the entity on an individual basis, competent authorities should, within the framework of 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 existence and specific features of intra-group financial support arrangements.
Competent authorities should discuss and coordinate the following within the framework of 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 Article 113 of Directive 2013/36/EU;
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 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 under Article 113 of Directive 2013/36/EU as specified in the Commission Implementing Regulation (EU) No 710/2014 with regard to conditions of application of the joint decision process for institution-specific prudential requirements.