The European Banking Authority (EBA) has published a report on the treatment of incoming third country branches (TCB) under the national law of Member States (the ‘Report’). The Report is based on Article 21b(10) of the Capital Requirements Directive (CRD), which mandates the EBA to submit a report to the European Parliament, the Council and the Commission on the treatment of third-country branches under national law of the Member States by 28 June 2021. In light of the increased volume of activities carried out by TCBs in a context of regulatory fragmentation across the EU, the Report lays down 14 high-level policy recommendations for further harmonisation of EU law.
The recommendations focus on EU centralised equivalence assessment; effective cooperation supported by the conclusion of memorandum of understanding with third country home authorities; an appropriately determined scope of authorisation and prudential requirements (notably capital, liquidity, internal governance including booking arrangements); certain anti-money laundering and counter terrorist financing aspects; a uniform minimum reporting framework; and satisfactory recovery plans.; they also introduce a subsidiarisation mechanism as a risk prevention and mitigation measure.
The EBA has highlighted the importance of a continuous supervisory dialogue with the TCB and third country credit institution, and of an effective mutual cooperation with the third country home authority. In this context, the EBA has carefully considered the interaction with the framework relating to the intermediate parent undertaking (IPU). While assets held by TCBs are computed to determine whether an IPU needs to be established, the TCB itself is not included within the IPU consolidated perimeter.
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