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EBA final guidelines on supervision of significant branches

EBA guidelines on supervision of significant branches

On 1 November 2017, the European Bank Authority (EBA) published final Guidelines on the supervision of significant branches.


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With a main objective 'to provide competent authorities with a set of criteria and procedures for precise, duly diligent and prudent supervision of significant branches', the Guidelines seek to converge national approaches to the prudential supervisory framework by recommending consistent supervisory practices over significant branches. The Guidelines reflect the view that financial institutions with significant cross-border activities via branches require more diligent treatment and closer co-operation between home and host competent authorities.

In general terms, the final Guidelines:

  • address the prudential supervision of 'significant plus' branches of EU institutions established in another EU Member State; these do not apply to branches of institutions with head offices are in third countries
  • provide a framework for the identification of 'significant plus' branches through a common assessment carried out by home and host Competent Authorities of the branches' relevance to the institution or the potential impact on financial stability in the host Member State
  • outline a co-ordinated approach to their supervision and the assessment of recovery planning facilitated through the framework of colleges of supervisors
  • propose a set of principles that Competent Authorities should comply with in the performance of risk assessments of institutions with 'significant plus' branches, including the exchange of supervisory intelligence and information, planning of supervisory activities, on-the-spot checks and inspections, application of supervisory and precautionary measures, and allocation of tasks between authorities
  • do not interfere with the tasks and responsibilities conferred on the consolidating supervisor and the home and host Competent Authorities by the Capital Requirements Directive (CRD) and Bank Recovery and Resolution Directive (BRRD), and merely aim at establishing a framework for effective and efficient cooperation within colleges of supervisors when exercising those tasks and discharging those responsibilities
  • do not limit in any form the freedom of institutions to establish branches in other Member States, nor introduce additional obligations to institutions in terms of Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP) or reporting.

Classification 'significant plus'

The Guidelines determine that in order to assess whether a branch, which has already been designated as significant, should also be classified as 'significant plus', Competent Authorities should carry out a common assessment (or 'intensification test') and aim to reach a common conclusion on its outcomes. In essence, a branch identified as significant and performing critical functions assessed as important either for the institution or the group or for the financial stability of the host EU Member State, should be categorised as 'significant plus'. This classification justifies a co-ordinated approach to its prudential supervision, including the assessment of its recovery planning framework.

Implications for clients

Clients should ensure they are informed about the specified supervisory implications for 'significant plus' branches. EBA expects Competent Authorities and financial institutions to make every effort to comply with the Guidelines. In addition to the intensification test, the Guidelines include ongoing supervision provisions for 'significant plus' branches, compliance and regulatory reporting requirements, the conduct of rigorous branch risk assessments, broader entity recovery planning provisions, the performance of on-the-spot checks and inspections, and the importance of ensuring consistent and regular communications with the branch management.

Next steps

The Guidelines will come into force on 1st January 2018.

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