Circular CSSF 18/693 is a CSSF circular, published 5 July 2018. Subject: Adoption of the Guidelines of the European Banking Authority on connected clients under Article 4(1)(39) of Regulation (EU) No 575/2013 (EBA/GL/2017/15).
\nRelevant for: Credit institutions, Investment firms.
\nLuxembourg, 5 July 2018 To all credit institutions and CRR investment firms incorporated under Luxembourg law and to Luxembourg branches of credit institutions and CRR investment firms having their registered office in a third country
\nCSSF CIRCULAR 18/693 Re : Adoption of the Guidelines of the European Banking Authority on connected clients under Article 4(1)(39) of Regulation (EU) No 575/2013 (EBA/GL/2017/15) Ladies and Gentlemen, The purpose of this circular is to draw your attention to the Guidelines of the European Banking Authority (EBA) on connected clients under Article 4(1)(39) of Regulation (EU) No 575/2013 1 (EBA/GL/2017/15 – the “Guidelines”) that enter into force on 1 January 2019 2 and with which the CSSF intends to comply in its capacity as competent authority. 3
\nRegulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (the “CRR”).
\n2 As of 1 January 2019, the Guidelines will repeal the “Guidelines on the implementation of the revised large exposures regime” issued by the Committee of European Banking Supervisors (CEBS) on 11 December 2009 (the “CEBS Guidelines”). 3
\n“Significant supervised entities” as defined in Article 2, point 16 of Regulation (EU) No 468/2014 of the European Central Bank (ECB) of 16 April 2014 (SSM Framework Regulation) shall refer to the relevant ECB rules (if any): See https://www.bankingsupervision.europa.eu/legalframework/regulatory/compliance/html/index.en.html
\nArticle 4(1)(39) CRR defines “group of connected clients” as: “(a) two or more natural or legal persons who, unless it is shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other or others; (b) two or more natural or legal persons between whom there is no relationship of control as described in point (a) but who are to be regarded as constituting a single risk because they are so interconnected 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. Notwithstanding points (a) and (b), where a central government has direct control over or is directly interconnected with more than one natural or legal person, the set consisting of the central government and all of the natural or legal persons directly or indirectly controlled by it in accordance with point (a), or interconnected with it in accordance with point (b), may be considered as not constituting a group of connected clients. Instead the existence of a group of connected clients formed by the central government and other natural or legal persons may be assessed separately for each of the persons directly controlled by it in accordance with point (a), or directly interconnected with it in accordance with point (b), and all of the natural and legal persons which are controlled by that person according to point (a) or interconnected with that person in accordance with point (b), including the central government. The same applies in cases of regional governments or local authorities to which Article 115(2) applies.” The concept of ‘group of connected clients’ is particularly relevant for the large exposures regime as it constitutes a backstop designed to limit the impact of the failure of a client or a group of connected clients on an institution. The concept is also relevant to the following areas of the CRR where the concept of “group of connected clients” is also used: -
\nthe categorisation of clients in the retail exposure class for the purposes of credit risk in the standardised approach (art. 123(c) CRR) and in the IRB approach (art. 147(5)(a)(ii) CRR);
\nThe text above is the opening of the document; the PDF carries the whole.
\nDocument page, PDF. Source: Commission de Surveillance du Secteur Financier (CSSF), reproduced with the CSSF's consent. The French text prevails.
"}