The European Banking Authority (EBA) has published a consultation paper on the scope of the draft guidelines on connected clients under Article 4(1)(39) of the Capital Requirements Regulation (CRR).

The objective of the definition of ‘group of connected clients’ in Article 4(1)(39) of the CRR is to identify clients so closely linked by idiosyncratic risk factors that it is prudent to treat them as a single risk.

The EBA has already revised the Guidelines on the implementation of the revised large exposures regime issued by the Committee of European Banking Supervisors on 11 December 2009. The EBA has also consulted on a draft proposal of guidelines on connected clients under Article 4(1)(39 CRR.

The current consultation is seeking to extend the scope of the draft guidelines previously consulted on by clarifying and operationalising the concept of interconnection, in particular when control or economic dependency should lead to the grouping of clients because they constitute a single risk in accordance with Article 4(1)(39) of the CRR. Both types of interconnection are being considered, namely:

  • clients directly or indirectly interconnected by a control relationship as defined in Article 4(1)(37) of the CRR; and
  • clients interconnected by some form of economic dependency as set out in Article 4(1)(39)(b) of the CRR, as for instance: (i) direct economic dependencies such as supply chain links or dependence on large customers; or (ii) clients with a main common source of funding in the form of credit support, potential funding or direct, indirect or reciprocal financial assistance.

The deadline for comments on the consultation paper is 26 June 2017.

View EBA consults on scope of its draft guidelines on connected clients, 25 May 2017