ELM 7.2 Purpose

The requirements of this chapter address three main areas of supervisory concern arising from group membership:

1. (1)

   losses in another group entity lead to financial pressure on a firm, because of financial or reputational linkages, or both;

2. (2)

   capital is subject to double gearing or leveraging: that is, a solo assessment of a firm over-estimates the quantity or quality of capital, or both, that is available to support that firm's risks, because of the way its capital has been raised or accounted for by the group;

3. (3)

   business is booked in an unauthorised group entity to avoid regulatory requirements.

This chapter implements the consolidation requirements of the Banking Consolidation Directive as applied by article 2 of the E-Money Directive.