7 Organisational framework in a group context

In accordance with Article 109(2) of Directive 2013/36/EU, parent undertakings and subsidiaries subject to that directive should ensure that governance arrangements, processes and mechanisms are consistent and well integrated on a consolidated or sub-consolidated basis. To this end, parent undertakings and subsidiaries within the scope of prudential consolidation should implement such arrangements, processes and mechanisms in their subsidiaries not subject to Directive 2013/36/EU, including those established in third countries, including in offshore financial centres, to ensure robust governance arrangements on a consolidated and sub-consolidated basis. With regard to remuneration requirements some exceptions in line with Article 109 (4) and (5) apply³¹ . Competent functions within the consolidating institution and its subsidiaries should interact and exchange data and information as appropriate. The governance arrangements, processes and mechanisms should ensure that the consolidating institution has sufficient data and information and is able to assess the group-wide risk profile, as detailed in Section 6.2.

³¹ Please refer also to the EBA guidelines on sound remuneration policies

The management body of a subsidiary that is subject to Directive 2013/36/EU should adopt and implement on the individual level the group-wide governance policies established at the consolidated or sub-consolidated level, in a manner that complies with all specific requirements under EU and national law.

At the consolidated and sub-consolidated levels, the consolidating institution should ensure adherence to the group-wide governance policies and internal control framework as referred to in Title V by all institutions and other entities within the scope of prudential consolidation, including their subsidiaries not themselves subject to Directive 2013/36/EU. When implementing governance policies, the consolidating institution 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 consolidating institution should consider the interests of all its subsidiaries, and how strategies and policies contribute to the interest of each subsidiary and the interest of the group as a whole over the long term.

Parent undertakings and their subsidiaries should ensure that the institutions and entities within the group comply with all specific regulatory requirements in any relevant jurisdiction.

The consolidating institution should ensure that subsidiaries established in third countries, and which 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 74 to 96 of Directive 2013/36/EU and these guidelines, as long as this is not unlawful under the laws of the third country.

The governance requirements of Directive 2013/36/EU and provisions in these guidelines apply to institutions 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 consolidating institution, the scope of prudential consolidation does not include the level of the parent undertaking located in a third country and other direct subsidiaries of that parent undertaking. The consolidating institution should ensure that the group-wide governance policy of the parent institution 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 2013/36/EU and the further specifications in these guidelines.

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