11.1 Application of the SREP to cross-border groups

When applying the SREP and these guidelines to investment firms groups, competent authorities should assess the viability of the group as a whole, as well as its individual entities, while seeking to avoid the unnecessary duplication of supervisory requirements. This can be done by dividing the process into two stages: (1) competent authorities make an initial assessment of entities under their direct supervision, and (2) competent authorities coordinate the assessment, where established within the framework of colleges of supervisors pursuant to the requirements of Articles 48(2) and Article 49 of Directive (EU) 2019/2034.

In accordance with the scope of application of the guidelines as specified in Title 1:

• a. consolidating supervisors should perform the initial assessment of the parent undertaking and the group of investment firms on a consolidated level; and
• b. competent authorities should perform the initial assessment on the entities under their supervision (individual, or sub-consolidated, where relevant).

Where these guidelines are applied to the subsidiaries of a cross-border group, competent authorities for subsidiaries should, when performing their initial assessment, primarily consider investment firms on an individual basis, i.e. assess the business model, strategy, internal governance and controls, risks to capital and liquidity, and capital and liquidity adequacy of an entity as they would for a standalone investment firm. The findings from such initial assessments, where relevant, should also include identification of key vulnerabilities in the group context, which may be related to the reliance of an investment firm on its parent/group for funding, capital and technological support. In their initial assessments made on an individual basis, competent authorities should also reflect strengths and mitigating factors related to the entity being part of the group, which may be related to group technological support and financial support arrangements.

The results of any such initial assessment of SREP elements, including, if identified, views on key dependencies on the parent/group, should serve as an input into the assessments and should be discussed by the competent authorities within the framework of the colleges of supervisors established pursuant to the requirements of Article 48 of Directive (EU) 2019/2034.

Following the discussions within the framework of colleges of supervisors, competent authorities should finalise their respective SREP assessments, making the necessary adjustments based on the outcomes of the college discussions.

Competent authorities should discuss and coordinate the following within the framework of colleges of supervisors:

• a. planning, including frequency, and timelines for performing the assessment of various SREP elements for the consolidated group;
• b. details of the application of benchmarks used for the assessment of SREP elements;
• c. approach to assessing and scoring sub-categories of risks individually, where such sub-categories have been identified as material;
• d. inputs required from the investment firm at consolidated and entity level for conducting the assessment of SREP elements;
• e. outcomes of the assessment, including SREP scores assigned to various elements, and the overall SREP assessment and overall SREP score at consolidated and entity level. When discussing the assessment of individual risks to capital and liquidity, competent authorities should focus on the risks that are identified as material for the respective entities;
• f. cross-border prudential implications of ML/TF risks and concerns; and
• g. planned supervisory and early intervention measures, if relevant.