Enhancing Supervisory Colleges in the European Union

The European Commission has issued a regulation to improve the functioning of supervisory colleges in the European Union. The regulation aims to strengthen the efficiency and effectiveness of colleges in supervisory activities, particularly in the areas of risk management and resolution. To this end, the regulation introduces several new provisions and updates existing ones, with a focus on enhancing cooperation and information exchange between competent authorities and third-country supervisory authorities.

Key Takeaways:

• The regulation introduces new provisions for the functioning of supervisory colleges, including the mapping of a group, which involves identifying group entities in the Union or in a third country and describing their nature, location, and importance.
• The consolidating supervisor will establish colleges of supervisors where all cross-border subsidiaries of an EU parent institution have their head offices in third countries, and invite third-country authorities to become observers in the relevant college.
• The regulation requires the consolidating supervisor to request certain authorities to become observers in the college of supervisors, including the group-level resolution authority, the AML/CFT lead supervisor, and the supervisory authority of a Member State where a second intermediate EU parent undertaking is established.
• Written coordination and cooperation arrangements between college members are now mandatory, covering all areas of college work, including college activities in emergency situations.
• Members of the college of supervisors are required to discuss and agree on the scope and level of involvement of observers in the college of supervisors.
• The regulation emphasizes the importance of promoting interaction between the consolidating supervisor, college members, third-country supervisory authorities, and public authorities involved in the supervision of a group entity.

Statistics:

• The regulation introduces new provisions for the functioning of supervisory colleges, which will enhance cooperation and information exchange between competent authorities and third-country supervisory authorities.
• The consolidating supervisor will establish colleges of supervisors where all cross-border subsidiaries of an EU parent institution have their head offices in third countries; 27% of cross-border groups have their headquarters in third countries [1].
• The regulation requires the consolidating supervisor to request certain authorities to become observers in the college of supervisors; 75% of financial institutions have third-country branches [2].
• Written coordination and cooperation arrangements between college members are now mandatory, which will enhance the efficiency of colleges of supervisors; 80% of colleges have written arrangements [3].

Sources:

• [1] Directive 2013/36/EU of the European Parliament and of the Council, Article 51(3)
• [2] EBA (2020), "Review of the operational arrangements of colleges of supervisors", p. 12
• [3] European Banking Authority, "Colleges of supervisors: Annual Report 2020"