GBIC comments on EBA draft RTS on groups of connected clients

23 November 2022

GBIC advocates for a consistent drafting of the RTS which will not lead to further burdens for institutions compared to the already existing EBA guidelines on groups of connected clients.

Question 1 Could you please indicate, if the approach of sections 4, 6 and 7 of the existing EBA guidelines, now transposed in the Articles of the draft RTS, remains sound and is implementable with no major challenge or unduly high costs. Please elaborate.

According to the consultation draft, the guideline requirements in sections 4, 6 and 7 were to be fully transposed into the RTS. However, these requirements have been tightened – even though according to the executive summary of the consultation draft these were to be transposed “without substantial changes”. In particular, circumstances that may lead to a group of connected clients due to economic dependencies are in danger of losing their indicative character due to the wording chosen in Article 2(1) (see question 5) and becoming circumstances in which a group of connected clients would be formed mechanistically, with no case-by-case assessment. In our opinion, Article 2(2) of the RTS does not fit with the concept of a single risk due to economic dependency, which is established subject to an individual case review based on at least the circumstances set out in paragraph 1, and is superfluous in our view. Either there is a single risk due to economic dependency or there is not. In our opinion, there is no scope to refute the single risk where one or more of the circumstances outlined in paragraph 1 is affirmed.
These RTS would indeed incur implementation costs due to the required technical changes and amendments to the banks’ documentation and processes. This should be avoided where possible.
We welcome the fact that the guidance on the alternative approach for exposures to central governments and supervisory expectations with regard to control and management procedures for identifying connected clients will stay in the guidelines as well as all the illustrative examples. The EBA is thereby following its mandate by drafting the RTS in line with Article 4(4) of the CRR. It must be ensured that there are no discrepancies between the RTS and the guidelines in the examples of the circumstances regulated in the RTS, including in the explanations....

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