On 8 June 2022, the European Banking Authority (EBA) launched a public consultation on draft regulatory technical standards (RTS) on the identification of a group of connected clients (GCC).

The definition of group of connected clients in the CRR provides for the identification of two or more natural or legal persons who are so closely linked by idiosyncratic risk factors, that it is prudent to treat them as a single risk. The purpose of the draft RTS is to specify the circumstances in which the conditions set out in Article 4(1)(39) of the Capital Requirements Regulation (CRR) are met. These conditions refer to cases in which two or more natural or legal persons:

• Are directly or indirectly interconnected by a control relationship as defined in Article 4 paragraph 1 number 37 of the CRR.
• Are interconnected by some form of economic dependency, so that, if one of them were to experience financial problems, in particular funding or repayment difficulties, the other or all of the others would also be likely to encounter funding or repayment difficulties.

The draft RTS revise and partially replace the current EBA guidelines on connected clients under Article 4 paragraph 1 number 39 of the CRR. Specifically the sections of the guidelines related to the circumstances of control, economic dependencies and their interaction, will be repealed and transferred without substantial changes to the RTS. All explanatory examples, as well as further 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.

The draft RTS also make clear that there might be exceptional situations where the institution can demonstrate, to its competent authority, that circumstances prevail that refute the existence of a single risk.

The consultation will run until 8 September 2022 and a public hearing will take place via conference call on 13 June 2022 from 13:30 to 15:30 CEST.

The final draft RTS will be submitted to the Commission for adoption. Following the submission, the RTS will be subject to scrutiny by the European Parliament and the Council before being published in the Official Journal of the European Union.