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These RTS and Guidelines establish a harmonised regulatory framework that will facilitate provision of intra-group financial support in the EU by enhancing clarity of procedures and overcoming existing obstacles. Competent banking authorities across the EU will grant authorisation for support on the basis of a number of conditions: the interest of the group as a whole and the risks which would materialise for the providing entity if the support was not provided; the expected success of the support, the terms of the support (and various prudential requirements applying to the providing entity), as well as the possible impact on financial stability and the resolvability of the providing entity.
The present regulatory framework for intra-group financial support differs widely across the EU, in particular for those cases of subsidiaries supporting parent companies (upstream support), making it difficult for banking groups operating in more than one EU member States (cross-border groups) to allocate and manage liquidity optimally during periods of financial distress. Uncertainties around conditions and resources for supporting the group entity in distress, as well as excessive regulatory constraints, can ultimately result in a destabilisation of the whole group.
The fulfilment of the conditions provided in these Standards and Guidelines must be assessed on the basis of the capital and liquidity situation of the concerned institution. Authorities across the EU will be required to conduct a risk analysis of the reasons for the financial distress of the institution concerned, as well as business models, current market situation and potential further adverse developments. Authorities are given flexibility to consider additional elements on a case-by-case basis.
In its ITS on the form and content of the disclosure of public support agreements, the EBA also specified the disclosure requirements for intra-group financial support. Ensuring greater transparency on support agreements in the EU banking sector allows creditors to make informed decisions and drives a better safeguard of the interests of investors and depositors in the supporting entity.
Guidelines on group financial support
ITS on Disclosure of Group Financial Support Agreements