Response to consultation on draft RTS on the identification of a group of connected clients (GCC)

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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.

Directions are quite clear and easily implemented on simple groups. Large groups on the other hand could be very complicated and most cases are not straightforward.

Question 2. Have you identified any additional aspect(s) that would require clarification? In this vein, would you see the need for further illustrative examples (and if yes, on which precise situation or specific case)? Please elaborate.

Yes more examples on more complicated cases would be helpful. Please see responses below.

Question 3. After considering the circumstances set out in Article 1 that constitute a single risk by means of control, could you please indicate if the described circumstances are sufficiently clear? Please elaborate.

Directions are quite clear and easily implemented on simple groups. Large groups on the other hand could be very complicated and most cases are not straightforward.

Question 4. Is the additional Scenario C 0 related to the determination of a group of connected clients by means of control, listed in Section 3.4.1 (Groups of connected clients based on a control relationship), sufficiently clear? Would you see need for further illustrative examples of a control relationship?

1. More complicated cases of joint control or indirect control could be included.
2. In cases of multiple shareholders/UBOs etc, where:
• a % of voting rights is required to make a decision (decisions described in Article 1 paragraphs 2-4)
• this % is only achieved with the positive contribution of a combination of shareholders
a) the fact that no one has the power to decide by themselves but some of them have the power to stop the remaining from reaching a decision would be an indication of control (and thus lead to considering this shareholder as part of a GCC)?
b) if only one combination of certain shareholders can achieve the % that is required to make the decisions, would this be an indication of control (leading again to a common group of the controlled entity and All the shareholders that would be required to reach a decision?)

Question 5. After considering the circumstances set out in Article 2 that constitute a single risk by means of economic dependency, could you please indicate if the described circumstances are sufficiently clear? Please elaborate.

Would appreciate further explanation or an example on point 1j.

Question 6. In point (c) of Article 2(1), would you prefer following a quantitative approach by replacing the term “significant part” with a threshold of “50% or more” as envisaged in point 1 of LEX 10.16? What would be the advantages or disadvantages? Please elaborate.

A threshold would provide some clarity, but what happens if threshold is breached, and we can still prove there is no dependency?

Question 7. What is your view on the wording “that cannot be replaced in a timely manner without excessively increased costs” compared to the wording used in the GL “that cannot be easily replaced”? What do you think about this change, is it more comprehensible? Please elaborate.

There is an element of judgement in both so either could be used.

Question 8. Is the additional Scenario E 8 related to the determination of a group of connected clients by means of economic dependencies, listed in Section 3.4.2 (Establishing interconnectedness based on economic dependency), sufficiently clear? Would you see need for further illustrative examples of an economic dependency relationship? Please elaborate.

Further explanation on what constitutes "management on a unified basis”.

Question 9. After considering the circumstances set out in Article 3 that constitute a single risk by means of the combined existence of control and economic dependencies, could you please indicate if the described circumstances are sufficiently clear? Please elaborate.

Directions are quite clear and easily implemented on simple groups. Large groups on the other hand could be very complicated and most cases are not straightforward.

Question 10. Is the additional Scenario E 7 related to the determination of a group of connected clients by means of the combined existence of control and economic dependencies, listed in Section 3.4.3 (Relation between interconnectedness through control and interconnectedness through economic dependency), sufficiently clear? Please elaborate.

A more complicated scenario whereby P1 and P2 are also connected with other (own group of companies) should be added.
To use scenario E7 as the basis and build on it, P1 is the whole owner of group of companies (P1x), P2 is the owner of another group of companies (P2y) and both are jointly owners of companies ABC (as in scenario E7). If we assume that P1, P2 and companies A,B,C, form a GCC do we have to include in this GCC ALL group entities of groups P1x and P2y? If not, how do we establish where the connection stops?
If we further assume that group P2y includes companies owned solely by P2 and companies jointly owned by P2 and a 3rd party P3 the situation becomes more complicated.
These are the kinds of examples that could be included.

Name of the organization

Bank of Cyprus