Although we have some sympathy and understanding for the need to set a certain level of harmonisation and legal certainty, we are of the opinion that the final range of elements proposed in both the draft RTS and guidelines is too narrow. As a result, it might reduce the necessary safeguards for the providing entity when assessing whether there is a reasonable prospect that financial difficulties of the receiving entity will be redressed.
We would suggest a more prudent approach, where the providing entity should have the right to consider, on a case-by-case basis, further relevant elements of a credit assessment. We see an added value in harmonising the approach under the intra-group support with the assessment the providing entity conducts when granting a loan to an entity outside the group. This will assure a unified treatment by the providing entity of all entities in comparable financial positions and thus adequate safeguards the overall financial soundness of the providing entity.
Furthermore, we are of the opinion that there is a high level of harmonisation in the credit assessment models and approaches within entities of the same group, which further supports our opinion that a fully-fledged credit assessment would be warranted. Under this assumption, the fully-fledged approach does not jeopardise the overall idea of harmonisation and legal certainty needed by both the draft RTS and guidelines, as the different entities within the same group will base their decisions on the same credit assessment model.
Based on our arguments above, we would welcome if Article 3 of the draft RTS and Paragraph 6 of the draft guidelines could be amended as follows, ideally in a separate paragraph: “Paragraph 1 [in Article 3 of the draft RTS] / Paragraph 6 [in the text of the draft guidelines] is without prejudice to considering on a case-by-case basis further relevant elements of a credit assessment performed by the providing entity when deciding on granting a loan to an entity outside the group which is in a comparable financial position to the receiving entity.”
No comment
On a more technical note, we have difficulties to understand why the draft EBA guidelines put an obligation upon both the providing entity and the competent authority of the providing entity as regards the reasoned statement (Article 9(a)). We are of the opinion that the obligation of the providing entity to submit the statement and the obligation of the competent authority to require the statement create unnecessary ambiguity and gives leeway for interpretation. We would suggest redrafting this text to “The providing entity should submit to the competent authority a reasoned statement […], or the providing authority should apply for authorisation of non-compliance with these requirements.”, which, in our view, provides for an automatic right for the competent authority to require the reasoned statement if it is not submitted by the providing entity.
no comment
Article 10(c) provides for some aspects that the competent authority should take into account when assessing the provision of the support despite the non-compliance. We would suggest expanding the wording of this text to further specify elements the competent authority should analyse and verify in order to assure that the providing entity has the capacity to improve its liquidity conditions, i.e. based on favourable market conditions. We would therefore suggest expanding the wording in Article 10(c) as follows:
“(c) When assessing whether to authorise the provision of the support despite the non-compliance with the above mentioned requirements, the competent authority should take into account the following:
(i) The period of time during which the providing entity does not comply with the relevant liquidity limits;
(ii) the significance of the non-compliance, including their measurement by the liquidity coverage ratio and the net stable funding ratio and the identification of the providing entity´s liquidity needs therein;
(iii) the providing entity´s plan for eliminating the non-compliance, including the analysis of directly available liquidity buffers, the overall counterbalancing capacity available to the providing entity and its ability to monetise its liquid assets;
(iv) market conditions, including the risk appetite for investors to provide funds;
(v) the best interest of the providing entity, including indirect benefits resulting from a stabilisation of the group as a whole; and
(vi) the impact on financial stability.”
On a more technical note, we have difficulties to understand why the draft EBA guidelines put an obligation upon both the providing entity and the competent authority of the providing entity as regards the reasoned statement (Article 10(a)). We are of the opinion that the obligation of the providing entity to submit the statement and the obligation of the competent authority to require the statement create unnecessary ambiguity and gives leeway for interpretation. We would suggest redrafting this text to “The providing entity should submit to the competent authority a reasoned statement […], or the providing authority should apply for authorisation of non-compliance with these requirements.”, which, in our view, provides for an automatic right for the competent authority to require the reasoned statement if it is not submitted by the providing entity.
We would welcome some further clarifications why Article 10(d) envisages authorisation by the competent authority of the non-compliance under extraordinary circumstances for two specific cases only, thus if the providing entity is the subsidiary of the receiving entity or they are both subsidiaries of the same group. The ECB is supervising many groups on the basis of significance of cross-border activities (Article 6(4)(iii) of the Council Regulation No 1024/2013), where the distress or failure of the subsidiary might have direct adverse effects on financial stability and might lead to a destabilisation of the group. We would therefore suggest expanding the authorisation of the non-compliance under extraordinary circumstances also to cases when the providing entity is the parent undertaking and the receiving entity is its subsidiary.
Article 2 specifies that the disclosure should be made following the conclusion and any revision of the group financial support agreement; whereas Article 3(e) further specifies that the institutions should also disclose information related to market conditions at the time of the support. For legal clarity, we would suggest to expand the wording of Article 2 and specify that the disclosures on the website of each entity should be made without delay following also the activation of the group financial support agreement.
Furthermore, for clarity reasons, we would advise that the consolidating entity discloses not only group financial support agreements it is a party to, but an overview of all financial agreements of all entities within the group.