Does consolidated supervision of a bank exist in the jurisdiction? If so, what are the consequences?

Banking & Finance

Israel Small Flag Israel

With respect to banking corporations, the BoI recognizes the need to consider banking group consideration, for purposes of stability, risk management and exposure. Therefore, in several PMB's issued by the BoI, it is stipulated that the banking corporation's board of directors will take into account in its policy and strategy the banking corporation's group structure, and the ability to control and manage risks in the group. Similarly, the risk management policy of the banking corporation should take into account its subsidiaries and the board of directors shall determine general instructions for corporate governance and control in the banking corporations' subsidiaries including subsidiaries and branches outside of Israel.

For that purpose, the board of directors of a banking corporation is required to create a supervision mechanism, which will ensure fluent transfer of information and ensure that the banking corporation internal auditor shall receive all required information, on his discretion, which will allow him to conduct examinations and other procedures in other corporations in the group. In addition, the banking corporation's audit committee is required to refer to the suitable scope of internal audit in the banking corporations' subsidiaries and to recommend it to the board of directors.

Hungary Small Flag Hungary

Yes, the HNB may exercise supervision on a consolidated basis. If the HNB finds any evidence to substantiate close links between entities it supervises in the course of its inspections, it may declare a credit institution registered in Hungary subject to supervision on a consolidated basis or may decide to extend consolidated supervision over a company affected. Consequences result in obligations to provide data and information by holding members or entities having a close link to the credit institution that is subject to consolidated supervision, and also in obligations regarding operating a secure IT system as well as internal procedures and mechanism in order to identify, measure and monitor transactions subject to the consolidated supervision by the HNB.

Latvia Small Flag Latvia

Yes, consolidated supervision of banks exists in Latvia. Consolidated supervision of banks contributes to effective supervision of complex multinational banking or financial services organisations and promotes transparency.

Lithuania Small Flag Lithuania

Yes, consolidated supervision of a bank apply in Lithuania.

As a general rule, a bank which is the parent of a group must prepare and submit to the Bank of Lithuania consolidated financial statements and the reports. These reports must be submitted on a quarterly basis.

A parent bank shall publish the annual consolidated accounts in observance of requirements established by laws and legal acts of the Bank of Lithuania: balance sheet; profit (loss) account; cash flow statement; statement of changes in equity; explanatory notes; auditor’s opinion.

The Bank of Lithuania performing joint consolidating supervision of the whole financial group shall chair the meetings of the college of supervisors and shall decide which competent authorities participate in a meeting or in an activity of the college.

  • All members of the college shall be kept fully informed, in advance, of the organisation of such meetings, the main issues to be discussed and the activities to be considered.
  • The Bank of Lithuania shall plan and coordinate the activities of the colleges taking into account the relevance of their decisions to the participating supervisors, in particular the potential impact on the stability of the financial system in other EU Member States concerned.
  • The Bank of Lithuania shall notify EBA about the activities of the colleges, including in emergency situations and shall provide all information which is of particular relevance for achieving convergence of supervision.
  • Before applying sanctions and measures, the Bank of Lithuania shall consult with supervisors of the EU Member States responsible for exercising joint (consolidated) supervision. However, the Bank of Lithuania may decide not to consult in cases of urgency or where such consultation may jeopardise the effectiveness of the decisions. In this case, the Bank of Lithuania shall, without delay, inform the supervisors of the EU Member States.

Poland Small Flag Poland

Yes, consolidated supervision of a bank exists in Poland. In principle, it is even more detailed supervision and the given bank is still subject to individual supervision in Poland. The major consequences include:

  • the right of the Polish FSA to co-operate with respect to supervision with supervisory authorities from other countries;
  • the right of the Polish FSA to delegate to such foreign supervisory authorities some of its supervisory competences and the right to accept delegation from the other side;
  • the obligation of a bank to provide consolidated financial statements to the Polish FSA (including the financial statements of its subsidiaries or other affiliated entities which are not included in the consolidated financial statements);
  • the right of banking supervision inspectors to carry out control checks;
  • the obligation of a bank which is a dominant entity in the holding group to ensure the appropriate operation of the internal data control function.

The Polish FSA maintains the register of holdings.

Romania Small Flag Romania

The NBR conducts the supervision of credit institutions, at both individual and consolidated levels, in case of competent authority designation. The home supervisory authority has the responsibility in the field of supervision at consolidated level of a banking group. In the supervision of international banking groups, the NBR cooperates with its peers through the working structures and their relevant substructures at European level.

The NBR and the Financial Supervisory Authority are the resolution authorities in Romania.

The NBR, in its capacity as a resolution authority, is empowered to apply the following resolution tools: the sale of business tool, the bridge institution tool, the asset separation tool, the bail-in tool.

India Small Flag India

The RBI has issued guidelines for consolidated accounting and consolidated supervision in 2003. Consolidated supervision as implemented by the RBI includes:

  • consolidated financial statements (CFSs);
  • consolidated prudential returns (CPRs); and
  • application of certain prudential regulations such as capital adequacy, large exposures and liquidity gaps on a group basis.

The RBI has provided guidelines in relation to the compilation of CFSs and CPRs. CFSs are public documents to be prepared and published annually. This is in addition to the standalone annual reports of financial institutions and their subsidiaries. CPRs aim to capture data on a group level from the consolidated balance sheet, consolidated profit and loss account, operations of subsidiaries / related entities and select data on the financial / risk profile of the group. CPRs are to be filed with the RBI on a half yearly basis.

Japan Small Flag Japan

A holding company that holds more than 50% of the voting rights of a bank must obtain an authorisation to be a bank holding company, which is regulated by the Banking Act on a consolidated basis (e.g., maintenance of capital adequacy on a consolidated basis, and refraining from engaging in businesses other than banking and other financial businesses through its subsidiaries). Similar consolidated supervision also applies to banks that have subsidiaries.

Malta Small Flag Malta

Yes and the relevant provisions are set out in the Supervisory Consolidation Regulations 2014 (L.N. 31 of 2014), which implement the relevant articles of the CRD on the matter. In terms of these Regulations, the MFSA shall exercise supervision on a consolidated basis in the following circumstances:

a) where the parent undertaking is a parent institution or an EU parent institution, licensed in terms of the Banking Act;

b) where the parent of an institution licensed in terms of the Banking Act is a parent financial holding company or parent mixed financial holding company in a Member State or an EU parent financial holding company or EU parent mixed financial holding company;

c) where institutions authorised in two or more Member States, and one of the institutions is an institution licensed in terms of the Banking Act, have as their parent the same parent financial holding company, the same parent mixed financial holding company in a Member State, the same EU parent financial holding company or the same EU parent mixed financial holding company established in Malta;

d) where institutions authorised in two or more Member States, one of which is Malta, have as their parent more than one financial holding company or mixed financial holding company with head offices in different Member States, one of which is Malta and there is a credit institution in each of these Member States and the credit institution which is licensed in Malta has the largest balance sheet total;

e) where the parent financial holding company or parent mixed financial holding company is established in a Member State other than Malta and it has more than one institution authorised in the European Union other than the Member State where the financial holding company is set up, one of which is licensed in Malta, and the institution licensed in Malta has the largest balance sheet total.

In addition to the obligations imposed by the provisions of the Banking Act and any regulations or Rules made thereunder transposing the requirements of the CRD, and by the CRR, the MFSA acting as consolidating supervisor, shall carry out the following tasks:

  • coordination of the gathering and dissemination of relevant or essential information in going concern and emergency situations;
  • planning and coordination of supervisory activities in going concern situations, including in relation to the activities relating to supervision on a consolidated basis in cooperation with the European regulatory authorities;
  • planning and coordination of supervisory activities in cooperation with the European regulatory authorities involved, and if necessary with European System of Central Banks, in preparation for and during emergency situations, including adverse developments in institutions or in financial markets using, where possible, existing channels of communication for facilitating crisis management;
  • have written coordination and cooperation arrangements in place with European regulatory authorities responsible for supervising the other members of the group; and
  • establish colleges of supervisors.

Nigeria Small Flag Nigeria

In the year 2007, the CBN released an exposure draft framework for the Consolidated Supervision of Banks in Nigeria, calling for comments from relevant stakeholders. This draft is however not yet effective as a substantive regulation.

Norway Small Flag Norway

Norway does not participate directly in the EU's consolidated supervision body (the European System of Financial Supervision – ESFS). However, the NFSA is an ad hoc observer in the ESFS, and the NFSA co-operates closely with regulators in other EU/EEA countries. Furthermore, Norway has been granted status as an observer in the European Banking Committee (EBC) of the European Commission and the European Banking Authority (EBA). In addition, ESA co-operates with EBA where they can also participate in proceedings as an observer.

Furthermore, there is currently a co-operation agreement in place between the Nordic countries' (Norway, Sweden, Finland and Denmark) FSAs. In addition to annual meetings, the co-operation includes joint inspections of certain Nordic banking groups. One of the two systemically important institutions bank in Norway, Nordea, operates as branch of Nordea's Swedish bank entity from 2017. A cooperation agreement has also been entered into with Nordic FSAs and the European Central Bank (EU) on oversight of large branches.

The NFSA participates in the Nordic-Baltic Stability Group. The group consists of the respective Ministry of Finance, central bank and the FSA of each ofn the Nordic-Baltic countries. The group has developed a framework to coordinate cross-border measures in a possible crisis situation in systemically important cross-border financial institutions.

Finally, Norway is participating in both the Organisation for Economic Co-operation and Development (OECD)'s Committee on Financial Markets and the Basel Committee (of which Norway is not an official member, but participates in its general meetings held every second year).

Portugal Small Flag Portugal

Banco de Portugal is the national competent authority for the supervision of credit institutions on a consolidated basis.

Credit institutions under such supervision are obliged to submit to Banco de Portugal all information required for supervision and relating to undertakings in which they own holdings. Hence, undertakings in which institutions own holdings are obliged to provide those credit institutions with all necessary information for the purpose of supervision on a consolidated basis.

In addition, when the parent undertaking of one or more credit institutions is a financial holding company, a mixed-activity holding company or a mixed financial holding company, these and their subsidiaries, including those not included in the framework of supervision on a consolidated basis, shall provide Banco de Portugal with any information and clarification relevant for the purpose of supervision. Subsidiaries of a credit institution, financial holding company or mixed financial holding company not included in the scope of the supervision shall provide Banco de Portugal with all the relevant information.

Where deemed necessary for the supervision on a consolidated basis of credit institutions, Banco de Portugal may carry out on-the-spot inspections of financial holding companies, mixed-activity holding companies or mixed financial holding companies and their subsidiaries, as well as in ancillary services companies.

Qatar Small Flag Qatar

Qatar Central Bank obliges all national banks to apply all the ceilings and supervisory ratios on the consolidated level of the Bank and its group (branches and subsidiaries both inside and outside Qatar). QCB also expands its onsite and offsite supervision to include the bank and its group inside and outside Qatar.

Switzerland Small Flag Switzerland

FINMA may subject a financial group or financial conglomerate to its group or conglomerate supervision.

Under Swiss standards of consolidated supervision, it is required that the financial group is adequately organised; has an adequate internal control system; adequately records, mitigates and monitors risks in connection with its business activities; is managed by persons who can guarantee proper business conduct; complies with the duty of segregation of duties between management and the governing body for the guidance, supervision and control; adheres to the capital adequacy and risk diversification regulations; has adequate liquidity; correctly applies the accounting regulations on financial statement accounting; and has a recognised, independent and competent auditor.

Turkey Small Flag Turkey

In line with the Basel requirements to ensure quantitative consolidated supervision of banks, Banking Law and the secondary legislation issued thereunder require consolidated supervision of banks. Consolidated supervision is required when:

  1. the relevant bank is the parent; or
  2. the relevant bank is not the parent; but is part of a group the parent of which is a bank or financial holding company incorporated in Turkey.

Pursuant to the Banking Law, the local and foreign subsidiaries, branches and facility offices of a parent bank and any institutions being controlled together with a bank are subject to consolidated supervision and audit of the BRSA. The consolidated supervision extends to the overview of the transactions between the relevant bank and the institutions subject to consolidated supervision together with such bank as per the statutory limits (credit and specific limits pertaining to certain transaction types, such as donations) stipulated for the respective risk group consisting of the relevant bank and the entities subject to consolidated supervision therewith and their internal systems including internal control, audit and risk management units. Turkish banking legislation also requires that the capital adequacy ratios, leverage ratios and liquidity coverage ratios be calculated separately on a consolidated and unconsolidated basis.

Consolidated supervision of banks also envisages certain accounting and reporting requirements to be undertaken by the relevant bank and the entities subject to consolidated supervision together with such bank. Pursuant to the Communiqué on Preparation of Consolidated Financial Statements by Banks, banks shall prepare consolidated financial statements incorporating data related to (i) their subsidiaries or affiliates qualified as credit or financial institutions, including insurance companies, institutions engaged in capital market activities, development and investment banks and financial holding companies, at the end of each quarter and (ii) all of their subsidiaries or affiliates regardless of whether these are qualified as credit or financial institutions, on an annual and semi-annual basis.

Austria Small Flag Austria

Parent institutions in a Member State have to comply with the consolidation obligations laid down in the CRR. The parent undertakings and their subsidiaries subject to the CRR must implement proper organizational structures and appropriate internal control mechanisms, to ensure that the data required for consolidation is duly processed and forwarded.

Bulgaria Small Flag Bulgaria

BNB exercises consolidated supervision on activities of banks and financial holdings (FHs) and financial holdings with mixed activity (FHMAs) to ensure their reliable and trustworthy management. BNB exercises prudential supervision on banks for maintenance of the stability of the banking system and prevention and reduction of systemic risks resulting from banking activities. The activities of a FH, FHMA or of a holding with mixed activity, which has a subsidiary that is a bank, is subject to consolidated supervision by BNB.

While exercising its supervising functions vis-à-vis a Bulgarian bank operating in another Member State(s), or vis-à-vis a bank licensed in a Member State and operating in Bulgaria through a branch, BNB takes into account the potential impact of its decisions on the financial stability of the respective Members State(s), especially in emergency situations. The regularity and intensity of the supervision and assessment are determined by the size of the respective bank, by its systemic importance, and the nature, scale and complexity of its activity. The supervision is done at least once a year. In case of finding that a bank may cause systemic risk, BNB notifies the EBA immediately of the results of the assessment.

BNB has the power to require from banks, from FHs and FHMAs, from their shareholders, from parent companies and subsidiaries, to present any accounting and other documents, as well as information on their activity, to inspect them on site and to freely access their offices and information systems.

When BNB finds that a bank licensed in another Member State having a branch or operating in the country directly, does not observe or has a material likelihood not to observe applicable law, BNB notifies the competent authority of the sending Member State. If it fails to undertake the necessary measures, BNB may take the issue to the EBA. BNB has the power to undertake measures and protect public interest in case of (threatened) violations of local law, including to forbid transactions on the territory of the country.

Ecuador Small Flag Ecuador

Yes, it exists. The Monetary and Financial Code establishes that the control agencies will carry out consolidated and cross-border supervision to an entire financial group, through: i) an adequate follow-up of their activities, and ii) the application of prudential guidelines to all the activities carried out by the groups at a local and international level, the transparency of their operations, the treatment of conflicts of interest, the service and the security of the clients and the identification of risks regarding solvency and liquidity matters, individually and at a consolidated level.

The local control bodies will carry out the consolidated supervision of the entity that acts as group head and its members, and will require the information that is necessary, to all the members of the financial group and will determine the requirement of consolidated technical patrimony of said groups.

Consolidated and cross-border supervision may be carried out in cooperation with foreign control entities, on the basis of agreements signed for such purpose, which, under criteria of reciprocity, should facilitate the exchange of information among them.

Ireland Small Flag Ireland

CRR governs consolidated supervision. Section 99 of CRRI provides that the CBI is responsible for con-solidated supervision where it has authorised an institution which is:

(a) a parent institution in Ireland; or

(b) an EU parent institution; or

(c) subject to specific exceptions set out in CRRI, any of: a financial holding company in a member state; a mixed-financial holding company in a member state; an EU parent financial holding company; or an EU parent mixed-financial holding company.

Where the parent undertaking of one or more institutions is a mixed-activity holding company and the CBI is responsible for the supervision of one or more of those institutions, the CBI shall exercise general supervision and overview of transactions between the institution and the mixed-activity holding company and its subsidiaries. The CBI evaluates the risk management strategies, policies, processes and limits established. These include sound reporting and accounting procedures in order to identify, measure, monitor and control transactions with the institution’s parent mixed-activity holding company and its subsidiaries. In addition any institution authorised by the CBI is obliged to report significant transactions to the CBI which shall be subject to overview by the CBI.

Where the CBI is responsible for consolidated supervision of an EU parent bank with a subsidiary/subsidiaries subject to supervision by the competent authorities of other member states OR where the CBI is responsible for the supervision of a subsidiary of an EU parent bank, it will make all efforts to reach a joint decision with the relevant competent authorities or competent supervisor (as relevant) in relation to:

(a) internal capital and risk to determine the adequacy of the consolidated level of own funds held by the group of institutions with respect to the group’s financial situation and risk profile;

(b) any CBI requirement for an institution to hold own funds in excess of the requirements of the prescribed capital buffers (CCB, CCyB, G-SII buffer and O-SII buffer) ;

(c) any measures to address any significant matters and material findings relating to liquidity supervision.

CRRI sets out procedures to be followed in relation to reaching joint decisions and also provisions to apply in the event that agreement on decisions cannot be reached or co-operation from the competent authority of another member state has not been forthcoming. The CBI may refer instances of no agree-ment or non-co-operation to the EBA.

Where the CBI is the competent supervisor of a parent bank with significant branches in other member states, the CBI will set up and chair a college of supervisors, to facilitate co-operation with the competent authorities of the other relevant member states. The CBI will decide which competent authorities shall participate in a meeting of the college. The college shall operate on the basis of written arrangements determined after consultation with the competent authorities. The CBI will develop a framework between itself, the EBA and other relevant competent authorities in order to:

(a) exchange information;

(b) agree delegation of responsibilities;

(c) agree supervisory examination programmes;

(d) increase supervisory efficiency by removing duplication;

(e) consistently apply prudential requirements under CRDIV and CRR across all entities within a group; and

(f) plan and coordinate supervisory activities in preparation for and during emergency situations using, where possible, existing channels of communication for facilitating crisis management.

France Small Flag France

Banking groups supervised on a consolidated basis shall:

  • implement the necessary means to ensure compliance, in entities controlled exclusively or jointly, the provisions of the Order of November 3, 2014 relating to the internal control of banks and, where appropriate, European provisions, unless their application would be unlawful under a State outside of EU or EEA in which a subsidiary is established;
  • ensure that the systems put in place within these banks are coherent with each other in order to measure, monitor and control the risks incurred at the consolidated level;
  • verify the establishment of an organisation, a control system and the adoption within those enti-ties of adequate procedures in order to product information necessary for the exercise of the monitoring on a consolidated basis.

These banking groups are supervised by the BCE or the ACPR (where the parent company is a French credit institution or investment firm) depending of their seize.

Supervision on a consolidated basis affects all the entities of the group and involves that the ACPR, where appropriate, ensures with the competent authorities concerned:

  • Coordination of the collect and publication of relevant or essential information (especially with on-site control missions);
  • Planning and coordination of prudential supervision activities.

Belgium Small Flag Belgium

Yes, but only up to the extent defined under Book II, Chapter IV of Title III of the Banking Act (sections II and IV): only credit institutions which fit the definition of ‘parent company’ or credit institutions which themselves have as a parent company a financial holding company in a EU member state or a mixed parent financial holding company in a EU member state will be subject to consolidated supervision.

The levels of consolidated supervision, their relationship with the supervision of individual credit institutions, the subject matter and the scope of consolidated supervision are set out in Part 1, Title II, Chapter II of the European Regulation no. 575/2013.

Estonia Small Flag Estonia

In Estonia the consolidated supervision exists. If the FSA exercises supervision on a consolidated basis, it shall submit the decision together with the corresponding reasons to the credit institution which is the parent undertaking of the consolidation group, and to all the relevant financial supervision authorities.

The FSA must forward to the financial supervision authority of the other contracting state the amount of own funds of the credit institution and on the basis of the capital adequacy ratio of the parent company or the banks on a consolidated basis. If a branch established in the contractual state of Estonia has liquidity difficulties or may arise, the FSA shall immediately inform the supervisory authority of the other contracting state.

Greece Small Flag Greece

Yes, Law 4261/2014 includes detailed provisions on consolidated supervision. As a matter of principle, where the parent undertaking is established in Greece, consolidated supervision shall be exercised by the BoG or the HCMC (depending on whether such parent undertaking is licensed as a credit institution or an investment company). Where the parent undertaking is established in another EU member state, supervision over its subsidiaries in Greece on a consolidated basis shall be exercised by the competent authority of the member state supervising the parent undertaking.

Germany Small Flag Germany

As stated above, the CRR directly applies in Germany. As a consequence, the provisions dealing with regulatory consolidation, ie Art. 11 et seqq CRR, apply. This means that, in principle, capital and liquidity requirements have to be met on a consolidated basis. Further, the competent regulatory authorities shall coordinate their work so that only one authority is the main point of contact and responsible for the group.

United States Small Flag United States

The BHC Act provides for the FRB to supervise all domestic bank holding companies on a consolidated basis, encompassing the parent company and all subsidiaries, which allows the FRB to understand the organisation’s structure, activities, resources and risks and address deficiencies more efficiently. Under the International Banking Act of 1978, the FRB is also responsible for the overall supervision of US operations of foreign banking institutions with a US banking presence (including institutions that meet the definition of “qualifying foreign banking organisations,” the bulk of whose banking operations are conducted offshore). Consolidated supervision means not only that the FRB views the organisations it regulates comprehensively, but that subject organisations are charged to maintain comprehensive oversight and management of their aggregate risk exposures and identify concentrations quickly and accurately at the bank group level, across business lines and between legal entities. In the case of banks that are not part of bank holding companies, the bank and all of its subsidiaries are subject to consolidated supervision by their primary federal regulator.

Colombia Small Flag Colombia

As stated in question one above, the Superintendence of Finance is a technical entity responsible for inspecting, supervising and controlling any persons involved in operations related to the management, use or investment of resources collected from the public, including financial, insurance and securities exchange activities.

The consolidated supervision exists under Colombian jurisdiction by the name of Integrated Supervision Framework (Marco Integral de Supervisión). This is a method designed by the Superintendence of Finance in order to evaluate and integrate potential risks that can impact financial institutions and the financial system in general. Because of this, the Superintendence of Finance established different evaluating criteria for financial analysis, compliance, risk management, actuarial information, internal auditing, senior management, board of directors, capital, liquidity, and profitability.

Finland Small Flag Finland

The requirements and regional dimension regarding supervision of a consolidated group are regulated by the Capital Requirements Regulation.

A consolidation group refers to a group comprising the parent company, which may be a Finnish or a foreign credit institution or financial holding company, together with its subsidiaries that are credit institutions, financial institutions or ancillary banking services undertakings. Credit institutions acting as the parent company of a consolidation group are subject to supervision by the FFSA on a consolidated basis with respect to risk management, exposures to clients, monitoring large exposures as well as restrictions on large holdings and possession of real estate. Consequently financial ratios must be reported on a consolidated basis. A parent company of a consolidation group and the subsidiaries in the consolidation group must not take such a risk that would endanger the consolidated capital adequacy.

United Kingdom Small Flag United Kingdom

Yes. Consolidated supervision in the UK is derived from the requirements set by the Basel Committee on Banking Supervision. It enables prudential supervision of a bank to look to the strength of the bank's group and not just the entity itself. Following the CRR regime, calculations are required of group capital requirements and resources and reporting is made at both group and entity level.

Updated: February 14, 2018