7 Organisational framework in a group context

In accordance with Article 25 of Directive (EU) 2019/2034 and Article 7 of Regulation (EU) 2019/2033, and unless Article 8 of Regulation (EU) 2019/2033 is applied by competent authorities, Union parent undertakings and their subsidiaries subject to Directive (EU) 2019/2034 should ensure that governance arrangements, processes and mechanisms are consistent and well integrated on a consolidated basis. To this end, undertakings and subsidiaries within the scope of prudential consolidation should implement such arrangements, processes and mechanisms in their subsidiaries not subject to Directive (EU) 2019/2034, including those established in third countries including in offshore financial centres – to ensure robust governance arrangements on a consolidated basis. Competent functions within the Union parent undertaking and its subsidiaries should interact and exchange data and information as appropriate. The governance arrangements, processes and mechanisms should ensure that the Union parent undertaking has sufficient data and information and is able to assess the group-wide risk profile as detailed in Section 6.2.

The management body of a subsidiary that is subject to Directive (EU) 2019/2034 should adopt and implement at the individual level the group-wide governance policies established at the consolidated level, in a manner that complies with all the specific requirements under EU and national law.

At the consolidated level, the Union parent undertaking should ensure adherence to the group-wide governance policies and internal control framework as referred to in Title V by all investment firms and other entities within the scope of prudential consolidation, including its subsidiaries not themselves subject to Directive (EU) 2019/2034. When implementing governance policies, the Union parent undertaking should ensure that robust governance arrangements are in place for each subsidiary and consider specific arrangements, processes and mechanisms where business activities are organised not in separate legal entities but within a matrix of business lines that encompasses multiple legal entities.

A Union parent undertaking should consider the interests of all its subsidiaries, and how strategies and policies contribute to the interests of each subsidiary and the interests of the group as a whole over the long term.

A Union parent undertaking and its subsidiaries should ensure that the investment firms and entities within the group comply with all the specific regulatory requirements in any relevant jurisdiction.

The Union parent undertaking should ensure that subsidiaries established in third countries that are included in the scope of prudential consolidation have governance arrangements, processes and mechanisms in place that are consistent with group-wide governance policies and comply with the requirements of Articles 25 to 32 of Directive (EU) 2019/2034 and these guidelines, as long as this is not unlawful under the laws of the third country.

The governance requirements of Directive 2019/2034/EU and the provisions in these guidelines apply to investment firms located in the EU independent of the fact that they may be subsidiaries of a parent undertaking in a third country. Where an EU subsidiary of a parent undertaking in a third country is a Union parent undertaking, the scope of prudential consolidation within the EU does not include the level of the parent investment firm located in a third country and other direct subsidiaries of that parent undertaking. The Union parent undertaking should ensure that the group-wide governance policy of the parent investment firm in a third country is taken into consideration within its own governance policy insofar as this is not contrary to the requirements set out under relevant EU law, including Directive (EU) 2019/2034 and the additional specifications under these guidelines.

When establishing policies and documenting governance arrangements, investment firms should take into account the aspects listed in Annex I. While policies and documentation may be included in separate documents, investment firms should consider combining them or referring to them in a single governance framework document.