The members of the EACB welcome the opportunity to comment on the EBA draft Guidelines (GL) on connected clients as defined in Article 4(1)(39) of the CRR.
According to the proposed guidelines, institutions should assess the existence of a group of connected clients (GCC) as defined in Article 4(1)(39) CRR based on the criteria described in the draft GL for the purpose of Part Four of the CRR, i.e. for Large Exposures (LE).
It remains thus unclear how institutions are expected to handle this assessment in cases not related to LE. It would be unfeasible to have different approaches and definitions of GCCs.
Indeed, CRR requires the use of GCC as defined in Art. 4(1)(39) CRR not only for LE: Art.
123 and 147 CRR require it for the definition of Retail segment in both SA and IRB Approaches, Art. 172(1)(d) for rating process and Art. 501 for SME supporting factor. It is not clear whether it should be assumed that such areas would not be subject to the draft guidelines.
The GCC definition from Art. 4(1)(39) CRR is a concept firmly established in overall risk management processes. Established lending policies and credit application processes usually take into account the whole GCC and not each member separately. All GCC members are treated in the same portfolio of the respective business and risk management units who are consequently responsible for them throughout the lifetime of the GCC.
Therefore, we find it necessary to clearly define how the assessment of control relationship and economic dependency should be performed in general, and if there can be any differences between such assessments, depending on the purpose Art. 4(1)(39) CRR definition is used for.
Finally, we would point out that there is a clear need for a transitional period. As the new GL differ from the current set daring from 2009, EBA should consider a grandfathering period of at least 18 months from the date of publication of the final supervisory requirements. Institutions, or the service providers they employ, need sufficient time to prepare the required modifications of IT systems. Moreover they will have to evaluate every single counterparty on the differences between the old and new GL. It should be possible to carry out this review along with the regular routine of credit processes (taking into account necessary preliminary work such as elaborating the modifications, training the responsible staff etc).