The members of the EACB welcome the opportunity to comment on the EBA draft Guidelines on scope of the definition of group of connected clients (GCC).
The EBA aims to extend the concept of connected clients particularly in two different contexts, large exposures and the categorisation of clients in the retail exposure class for credit risk. While in general the EBA approach to establish one universal rule-set regarding the applicable GCC definition and rules for identifying and reporting of GCC for the purpose of CRR seems to be a step into the direction of simplification and improved consistency it would also lead to potential issues, particularly for the retail segments if applied as proposed.
First, the proposed scope of application is not sufficiently clear. It is unclear whether all retail exposure classes or only certain parts of it would be affected. Moreover, the requirements for the identification of potential GCCs are not appropriate and proportionate for the retail segment where the number of potential counterparts is much higher, causing disproportionate efforts.
In addition, Recital 55 CRR indicates that the objective for the large exposure regime is to deal with single name concentration risk without applying any risk weights or the degree of risks. As the objectives of these two concepts differ significantly, the application of definitions or provisions designed for either of them to the other one should be subject to a legal endorsement process and a careful impact assessment. The same would apply to any extension of provisions within the large exposure concept to any other CRR areas.
The draft GL on the Connected Clients (EBA/CP/2016/09) also intended to apply to shadow banking entities (para. 28). However, for the purpose of shadow banking the EBA has already delivered its regulatory product with the GL on limits to shadow banking exposures under Art. 395(2) CRR. The mandate of the EBA to develop Guidelines for the limitation of exposures to shadow banking entities is restricted to the large exposure regime and an extension of this definition for credit risk purposes is not legally justified.
Lastly, the initial application efforts and successive administrative burden for institutions caused by the implementation of and regular compliance with the proposed Guidelines go much beyond any potential advantages for the financial sector or the economy.