Commission Delegated Regulation (EU) 2023/1118 of 12 January 2023 supplementing Directive (EU) 2019/2034 of the European Parliament and of the Council with regard to regulatory technical standards specifying the conditions under which colleges of supervisors exercise their tasks (Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Directive (EU) 2019/2034 of 27 November 2019 of the European Parliament and of the Council on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (1), and in particular Article 48(8) thereof,

Whereas:

(1) In order to establish the colleges of supervisors and to identify college members and potential observers, it is necessary to map investment firm groups. The purpose of such mapping is to identify the group entities or branches in the Union or a third country and to describe for each group entity its nature, location, the authorities involved in its supervision, the applicable prudential exemptions, its importance for the group and its importance for the country in which it is authorised or established.

(2) To ensure a coherent application of Article 48 of Directive (EU) 2019/2034 across the Union and thus fair conditions of competition, it is important to promote convergence in the practices of group supervisors regarding the establishment of colleges of supervisors for investment firm groups. In particular, since the establishment of colleges of supervisors is left to the discretion of the group supervisor determined in accordance with Article 46 of Directive (EU) 2019/2034, it is essential to set common criteria that group supervisors should take into consideration when determining whether a college of supervisors should be established. Those common criteria should include proportionality criteria, reflect the need to facilitate supervisory tasks, and facilitate coordination between, and cooperation with, relevant third-country supervisory authorities, in particular where such coordination and cooperation is needed to exchange relevant information on the margin model with the supervisory authorities of the clearing members of the qualifying central counterparties (QCCPs) or the supervisory authorities of the QCCPs, and to update such information.

(3) To increase the efficiency and effectiveness of the functioning of colleges of supervisors, the written arrangements referred to in Article 48(6), third subparagraph, of Directive (EU) 2019/2034 should cover all areas of college work. Those written arrangements should therefore also cover arrangements among college members involved in specific college activities, including activities performed through specific substructures of the college where such substructures are established for efficiency purposes. For the same reason, the written arrangements should also cover the operational aspects of college work, as those aspects are essential for facilitating the functioning of the college of supervisors both in going concern and during emergency situations. Finally, the written arrangements should be comprehensive, consistent and exhaustive and should provide an adequate and appropriate basis for the competent authorities to discharge their duties and tasks within, rather than outside, the college of supervisors.

(4) Colleges of supervisors are a key tool for exchanging information, for preparing for and dealing with emergency situations, and for enabling the group supervisor to conduct effective supervision on a consolidated basis. To ensure consistency and to enable the European Banking Authority (EBA) to perform its tasks in accordance with Regulation (EU) No 1093/2010 of the European Parliament and of the Council (2), the EBA should participate in all colleges of supervisors. Furthermore, given the coordinating role of the colleges of supervisors for all supervisory activities regarding the investment firm groups that stem from other Union legislation, the European Securities and Markets Authority (ESMA) should always be invited to participate in the meetings and activities of the college of supervisors, in accordance with the written arrangements.

(5) To be able to perform all college activities, the group supervisor and the members of the college of supervisors should have an overview of the activities carried out by all entities of the investment firm group concerned, including the activities of those entities that carry out financial activities without being qualified as investment firms, and the activities of those entities that operate in third countries. For the same reason, interaction should be promoted between the group supervisor, the college members, public authorities or bodies in a Member State that are responsible for or involved in the supervision of any entity of the investment firm group, including competent authorities of host Member States where branches assessed as important are established, authorities or bodies that are responsible for the supervision of markets in financial instruments and for the prevention of the use of the financial system for money laundering and terrorism financing, authorities or bodies that are responsible for consumer protection, and resolution authorities. It is therefore important that those public authorities or bodies are allowed to participate in the work of the college of supervisors as observers, where appropriate.

(6) In the interest of transparency and to ensure the smooth functioning of the college of supervisors, college members should discuss and agree on the scope and level of involvement of other authorities, if any, who should participate in the college of supervisors as observers. The conditions for participation of such authorities as observers in the college of supervisors should be clearly set out in the written arrangements and should be communicated to all authorities participating as observers in the college of supervisors.

(7) In order to better perform their duties and to avoid duplication of tasks, including duplication of information requests addressed to the supervised entities of the group, members of the college of supervisors should closely work together and coordinate their supervisory actions to the maximum extent possible. For the same reason, members of the college of supervisors should regularly review any agreements on delegation of tasks and responsibilities, and in particular when college members determine the allocation of resources and develop the plan for on-site and off-site supervisory tasks at the level of the college of supervisors.

(8) The group supervisor should be able to have a global overview of the group situation and act as a facilitator, ensuring a smooth information flow among college members. Therefore, the group supervisor should have access to all information needed to perform its tasks and responsibilities and should act as the coordinator for the collection and dissemination of information received from any member of the college of supervisors, any other observer or any entity of the group, or any input received from any other supervisory bodies or authorities established in relation to the investment firm group. The same applies for the members of the college as they need to access relevant information to perform their tasks and duties in relation to the entities they are responsible for and the need to share relevant information with the other members of the college of supervisors. In particular, where the group supervisor determines that particular information is relevant for another member of the college of supervisors, it should not unjustifiably exclude members of the college from receiving that information.

(9) Colleges of supervisors facilitate cooperation and coordination between competent authorities. That is in particular the case for any decisions regarding the use of internal models for the calculation of own fund requirements that require prior permission from competent authorities. It is therefore important to specify conditions under which the group supervisor and the competent authorities concerned exchange information on the performance of internal models and discuss and reach agreement on measures to address identified inefficiencies.

(10) To allocate supervisory resources and to develop or coordinate of on-site and off-site supervisory tasks at the level of the college of supervisors, the members of the college of supervisors should take into account the outcomes of the supervisory review and evaluation process referred to in Article 36(1) of Directive (EU) 2019/2034 that is performed for the investment firm group and each of its entities. In order to better identify the priorities of the common supervisory work and ensure adequate resource allocation, the establishment of the college supervisory examination programme should therefore start once those supervisory review and evaluation processes have been finalised, and should be concluded once competent authorities have considered the tasks they have committed to perform at national level, the resources allocated to those tasks and the respective timelines for performing those tasks.

(11) Members of the college of supervisors should coordinate their activities in preparation for and during emergency situations, including adverse developments which may seriously jeopardise the orderly function and the integrity of the financial markets or the stability of whole or part of the financial system of the Union, or other situations that affect or might explicitly affect the financial and economic situation of an investment firm group or any of its entities.

(12) It is necessary to ensure that an emergency situation is properly assessed and addressed. Therefore, when dealing with an emergency situation, members of the college of supervisors should, under the coordination of the group supervisor, aim to develop a coordinated supervisory assessment of the situation, agree on a coordinated supervisory response and monitor the implementation of their response. Members of the college of supervisors should also ensure that any external communication is coordinated and that such communication covers elements that are agreed ex-ante among themselves.

(13) This Regulation is based on the draft regulatory technical standards submitted to the Commission by the EBA.

(14) The EBA has consulted ESMA, conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010,

HAS ADOPTED THIS REGULATION:

SECTION 1

ESTABLISHMENT OF COLLEGES

Article 1

Mapping of investment firm groups

(a) investment firms authorised in a Member State and branches established in a Member State, other than investment firms to which Article 1(2) of Regulation (EU) 2019/2033 of the European Parliament and of the Council (3) applies;

(b) financial institutions, ancillary services undertakings, tied agents and branches thereof authorised or established in a Member State;

(c) investment firms, financial institutions, ancillary services undertakings, tied agents and branches thereof authorised or established in a third country.

(a) the Member State where the investment firm is authorised or the branch is established;

(b) the competent authority responsible for the supervision of the investment firm or the competent authority of the host Member State where the branch is established, and other relevant financial sector authorities of that Member State, including competent authorities responsible for the supervision of markets in financial instruments, for the prevention of the use of the financial system for the purposes of money laundering or terrorism financing, for consumer protection and for resolution;

(c) for an investment firm, authorised in a Member State, whether it meets the criteria to be deemed to be a small and non-interconnected investment firm as referred to in Article 12(1) of Regulation (EU) 2019/2033.

(a) the Member State or the third country where the group entity or branch has been authorised or established;

(b) the authority responsible for or involved in the supervision of that group entity or branch;

(c) information on the importance of the group entity or branch for the Member State referred to in point (a) and for the investment firm group, and the relevant criteria used by the competent authorities to determine that importance.

Article 2

Determination of whether the establishment of a college of supervisors is appropriate

(a) the investment firm group consists of at least two investment firms authorised and operating in two different Member States;

(b) the exercise of the tasks referred to in Article 48 of Directive (EU) 2019/2034 would be facilitated by the establishment of a college of supervisors;

(c) the coordination and cooperation with relevant third-country supervisory authorities would be performed more effectively under a college of supervisors;

(d) coordination and cooperation are needed to exchange with the supervisory authorities of the clearing members of the qualifying central counterparties (‘QCCPs’) or the supervisory authorities of QCCPs for the purposes of Article 23(1), first subparagraph, point (c), and Article 23(2) of Regulation (EU) 2019/2033, and to update that information.

Article 3

Communication about the establishment of a college of supervisors

(a) notify the competent and supervisory authorities referred to in Article 48(5) of Directive (EU) 2019/2034 of their membership in the college of supervisors;

(b) inform the EBA and the Union parent investment firm, Union parent investment holding company or Union parent mixed financial holding company (any of these entities being also designated as ‘Union parent undertaking’) concerned about the establishment of the college of supervisors, about the identity of its members and observers, as well as about any changes in the composition of that college.

SECTION 2

FUNCTIONING OF COLLEGES

Article 4

Establishment of the written arrangements

(a) information on the overall structure of the group concerned, covering all group entities, including the Union parent undertaking;

(b) the identification of the members of the college of supervisors, including those members that are third-country supervisory authorities, and of the observers referred to in Article 5(1) of this Regulation;

(c) a description of the terms covering the participation for the third-country supervisory authorities referred to in Article 48(5), point (b), of Directive (EU) 2019/2034 in the college of supervisors, in particular regarding their involvement in the various dialogues and processes of the college of supervisors and their rights and obligations with regard to exchanging information within the college of supervisors;

(d) whether the group supervisor may invite observers as referred to in Article 5(1) of this Regulation and the terms of their participation in the activities of the college of supervisors;

(e) the arrangements for exchanging information, including the scope of the information, the frequency and channels of communication, including the exchange of information with third-country supervisory authorities and the resolution authorities referred to in Article 4(2), point (v), of Regulation (EU) No 1093/2010 that have been invited to participate in the college as observers;

(f) the arrangements for dealing with confidential information;

(g) the procedures for the collection of information from the entities of the investment firm group, and the procedures for the verification of that information;

(h) the process for coordinating information requests from the supervisory authorities of the clearing members of the QCCPs or the supervisory authorities of the QCCPs;

(i) the arrangements for delegating tasks and responsibilities, where relevant;

(j) a description of any substructures of the college, where relevant;

(k) the arrangements for the planning and coordination of supervisory activities in going concern situations;

(l) the arrangements for the planning and coordination of supervisory activities in preparation for and during emergency situations, including contingency planning, communication tools and procedures;

(m) the procedures for informing the group supervisor and the members of the college of supervisors before and after significant sanctions are imposed on entities of the investment firm groups;

(n) the communication policy of the group supervisor and of the members of the college of supervisors with the Union parent undertaking and with the group entities;

(o) agreed procedures and time frames for circulating the documents for meetings of the college of supervisors;

(p) any other agreement between the members of the college of supervisors, including agreed indicators for identifying early warning signs, potential risks and vulnerabilities;