Report from the Commission to the European Parliament and the Council on the rules governing the levels of application of banking prudential requirement

The supervision of a banking group which is composed of several credit institutions or investment firms is carried out at two levels, the level of the entire banking group and the level of each institution of the group. The first level corresponds to the supervision on a consolidated basis and the second level corresponds to the supervision on an individual basis. According to this principle of dual-level supervision, the banking prudential rules set out in Directive 2013/36/EU (‘CRD’) and Regulation (EU) No 575/2013 (‘CRR’) shall apply at both individual and consolidated levels. However, this principle is subject to a number of exceptions.

The purpose of this report is to assess the appropriateness of the rules governing the levels of application of the prudential requirements set out in CRD and CRR, in particular the exemption regime. This report jointly covers two mandates given to the Commission by the European Parliament and the Council:

– the first mandate requires the Commission to review and report by 31 December 2014 to the European Parliament and the Council, together with any appropriate legislative proposals, on the application of Articles 108 and 109 of CRD; these two articles specify the levels of application of the prudential requirements laid down in Articles 73 to 96 of CRD, as regards the internal capital adequacy assessment process (ICAAP), governance arrangements, risk management and remuneration policies;

– the second mandate requires the Commission to review and report on the application of Part One, Title II and Article 113(6) and (7) of CRR. Part One, Title II of CRR specifies the rules for applying on an individual or a consolidated basis all the other prudential requirements set out in CRD and CRR to institutions, including those in cooperative networks and institutional protection schemes (IPS). Article 113(6) and (7) of CRR specifies the conditions to be satisfied to exempt from liquidity requirements on an individual basis institutions which are members of the same IPS or institutions which are linked by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC.

The report is based on the opinion delivered by the European Banking Authority (EBA) in consultation with national competent authorities on 31 October 2014.