Banking Regulation - Supervision Of Banking Groups

5.1 What requirements apply with regard to the supervision of banking groups in your jurisdiction?

The Law of 5 April 1993 on the financial sector, as amended ('Banking Act') - which implements, among others, Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (CRD IV) and Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate, as amended - contains provisions on:

the supervision of credit institutions carrying on business in more than one EU member state; the supervision of credit institutions subject to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, as amended (CRR) on a consolidated basis; and the supplementary supervision of credit institutions in a financial conglomerate. The CRR also includes provisions with respect to prudential consolidation to which credit institutions may be subject.

The prudential supervision of Luxembourg credit institutions by the Commission de Surveillance du Secteur Financier (CSSF) covers the activities performed by such credit institution in other EU member states via the establishment of branches or the cross-border provision of services. The Banking Act also sets out the CSSF's powers with respect to Luxembourg branches of credit institutions from other EU member states, and the respective rights and competence of the CSSF and other competent authorities.

There are certain cases where the CSSF is required to exercise prudential supervision on a consolidated basis, meaning on the basis of the situation that results from applying the CRR requirements to a credit institution as if that credit institution formed, together with one or more other entities, a single institution. Such consolidated supervision applies, for instance:

to Luxembourg parent credit institutions; to Luxembourg parent financial holding companies having as a subsidiary a Luxembourg credit institution; and under certain conditions, where the relevant group includes a Luxembourg credit institution and such credit institution shows the largest balance-sheet total. The consolidated supervision covers, for instance...