These draft RTS, in conjunction with the EBA Guidelines on connected clients, provide the complete framework for the identification of two or more natural or legal persons who are so closely linked by idiosyncratic risk factors, that it is prudent to treat as a single risk.

In particular, the following conditions lead to the identification of two or more legal persons as connected:

• if they are part of the same consolidated financial statements, even in the absence of exposures towards the natural or legal person that controls the group. These draft RTS also provide a non-exhaustive list of circumstances of control criteria and control indicators to assess if there is a parent-subsidiary-similar relationship among natural and/or legal persons;
• if it is likely that the financial difficulties of one natural or legal person would spread to other(s) impacting full and timely repayment of liabilities;
• in case control and economic dependencies co-exist within group of connected clients in such a way that all relevant natural and/or legal persons constitute a single risk.

Legal basis and background

Article 4(4) of the CRR mandates the EBA to develop RTS specifying in which circumstances the conditions set out in point (39) of paragraph 1 are met, where Article 4(1)(39) of the CRR defines a GCC for the purpose of the Regulation.

The main basis for the development of the draft RTS has been the existing the EBA Guidelines on connected clients under Article 4 paragraph 1 number 39 of the CRR (EBA/GL/2017/15). The draft RTS also ensure a greater alignment to LEX Basel Standards, and in conjunction with the EBA Guidelines provide the complete framework for the identification of group of connected clients.

The EBA consulted on the draft RTS for three months, and the feedback received led to a clarification for grouping requirements to cover cases when two or more persons act in a concerted way – e.g., situations of natural persons with family ties. Minor amendments were also introduced to align the content of these draft RTS with that of the EBA Guidelines already implemented by institutions in their IT systems.