On 1 November 2017, the European Bank Authority (EBA) published final Guidelines on the supervision of significant branches.
With a main objective 'to provide competent authorities with a set of criteria and procedures for precise, duly diligent and prudent supervision of significant branches', the Guidelines seek to converge national approaches to the prudential supervisory framework by recommending consistent supervisory practices over significant branches. The Guidelines reflect the view that financial institutions with significant cross-border activities via branches require more diligent treatment and closer co-operation between home and host competent authorities.
In general terms, the final Guidelines:
In Ireland the Guidelines will run in tandem with the Central Bank’s approach to third country branches which need to seek authorisation from the Central Bank to operate in Ireland and must comply with the requirements set out in the Central Bank’s Policy Statement.
The Guidelines determine that in order to assess whether a branch, which has already been designated as significant, should also be classified as 'significant plus', Competent Authorities should carry out a common assessment (or 'intensification test') and aim to reach a common conclusion on its outcomes. In essence, a branch identified as significant and performing critical functions assessed as important either for the institution or the group or for the financial stability of the host EU Member State, should be categorised as 'significant plus'. This classification justifies a co-ordinated approach to its prudential supervision, including the assessment of its recovery planning framework.
Clients should ensure they are informed about the specified supervisory implications for 'significant plus' branches. EBA expects Competent Authorities and financial institutions to make every effort to comply with the Guidelines. In addition to the intensification test, the Guidelines include ongoing supervision provisions for 'significant plus' branches, compliance and regulatory reporting requirements, the conduct of rigorous branch risk assessments, broader entity recovery planning provisions, the performance of on-the-spot checks and inspections, and the importance of ensuring consistent and regular communications with the branch management.