On 19 February 2024, the European Central Bank (ECB) published a Memorandum of Cooperation that it had entered into with Member State competent authorities (NCAs) (together the Authorities) for the performance of their supervisory tasks in relation to the supervision of third country groups and third country branches.

Background

In accordance with Article 47(2a) of the Capital Requirements Directive IV (CRD IV), NCAs supervising branches of credit institutions having their head office in a third country and NCAs of institutions that are part of the same third-country group are to cooperate closely to ensure that all activities of that third-country group in the Union are subject to comprehensive supervision. This will prevent the requirements applicable to third-country groups pursuant to the CRD IV and the Capital Requirements Regulation (CRR) from being circumvented and as such, prevent any detrimental impact on the financial stability of the Union.

Purposes of the Memorandum of Cooperation 

The purposes of the Memorandum are outlined in Article 1 and require the Authorities to commit to general cooperation and exchange of information.

The purposes stated include ensuring cooperation with the aim that all activities of third country groups in the Union are subject to comprehensive supervision, in order to:

  • Strengthen the supervisory framework established by the CRD IV and the CRR that applies to third-country groups in the Union.
  • Prevent the circumvention of the requirements applicable to third country groups pursuant to the CRD IV and the CRR.
  • Prevent any detrimental impact on the financial stability of the Union.

Other purposes include to foster the supervisory framework within which the Authorities cooperate and coordinate actions on credit institutions with their head office in a third country that establish one or more third-country branches in the Union. This is in addition to facilitating the exchange of information between the Authorities on third-country groups and third-country branches and specify the timing and means of such exchange.

A further objective is to establish Supervisory Fora and facilitate their organisation and functioning, as well as facilitate the building of consensus on supervisory approaches taken by the Authorities. This relates to a final purpose, of ensuring the highest level of information exchange, including of confidential information, among the Authorities in the case of emergency situations, insofar as necessary.

Next steps

The Memorandum of Cooperation will be reviewed with agreement of the Authorities, three years after the date of its signature and/or following any substantial change to the EU regulatory framework applicable to third country branches.