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 Title 7 for cross-border groups is part of the competent authorities’ joint decision process pursuant to Article 113 of Directive 2013/36/EU.
The exercise of supervisory powers and the taking of supervisory measures, including with regard to imposing additional own funds pursuant to Article 104(1)(a) at consolidated or individual entity level as specified in Title 7 should be subject to the joint decision of the competent authorities pursuant to Article 113 of Directive 2013/36/EU.
For parent or subsidiary institutions of a cross-border group, the application of additional own funds requirements pursuant to Article 104(1)(a) of Directive 2013/36/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 additional own funds requirements, 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 use as an input in determining additional own funds requirements;
outcomes of the supervisory benchmark calculations used to determine additional own funds requirements for all entities within the group and at a consolidated level; and
additional own funds requirements 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 Title 7, competent authorities should consider the same level of application as the joint decision requirements under 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 additional own funds requirements 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 additional own funds requirements to address the risk of excessive leverage should be set, that should be carried out in accordance with the joint decision process provided for in Article 113(1)(a) CRD and 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 additional own funds requirements, competent authorities should consider:
aspects included in paragraph 394;
additional own funds 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 (including its size, the composition of own funds to cover it, and supervisory reaction) for parent or subsidiary institutions of a cross-border group should be shared among competent authorities and the setting of the P2G and P2G-LR 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 at solo level where no data from the supervisory stress tests is available at solo level, or, where relevant, agree on the application of P2G at consolidated level only.
The P2G and P2G-LR should be subject to joint decision of the competent authorities pursuant to Article 113(1)(c) of Directive 2013/36/EU and should be duly reflected in the joint decision document prepared in accordance with Article 113 of Directive 2013/36/EU.