What are we talking about?

If a bank belongs to a group outside the European Union (EU), it is considered a third-country group (TCG). If the TCG has two subsidiaries in the EU and is considered large, simplification of the legal structure is required. Large means: having a total asset value equal to or greater than EUR 40 billion in the EU, on average over the previous four quarters. In calculating this, branches in the EU that are directly owned by the TCG – so-called third-country branches (TCBs) – are included. 

Simplification of the structure means that the bank is required to establish an intermediate parent undertaking (IPU). An IPU is often seen as the central EU headquarters for supervisory purposes. The legal background is Article 21b of the Capital Requirements Directive (CRD). The rule has similarities with the US requirement for an intermediate holding company (IHC) for US operations of non-US banks with more than USD 50 billion of assets.

Why do banks need it?

There are four main reasons to establish an IPU. Firstly, many TCGs operate through multiple entities in the EU. If these standalone entities are subsidiaries, their licences are acquired through the national supervisor. In this way, supervision of the TCG is divided between multiple national supervisors – and can be subject to potential differences. In addition, the EU is the only major jurisdiction where the supervisor, on a consolidated basis, does not have a complete picture of the activities of TCGs operating through both subsidiaries and branches. These shortcomings not only create risks for financial stability and market integrity in the EU, but also affect the level playing field between TCGs operating in different countries and EU-based banks. 

Secondly, the IPU helps address challenges related to cross-border supervision. TCGs often operate across national borders. By establishing a single parent entity in the EU, the operations in the EU are centralized and streamlined. It provides a designated entity within the EU for communication and coordination between the group and relevant supervisors. Through the IPU, the TCG will be subject to consolidated supervision – either by the national supervisor of the IPU or the ECB. The supervisor can oversee the TCG’s operations as a whole. The IPU requirement enhances transparency and accountability within the TCG from the perspective of the supervisor. It enables the supervisor to have a clear view of the TCG’s operations, risk exposure and financial soundness, promoting a more effective regulatory oversight framework. 

Thirdly, implementing more centralized risk management and governance structures, allows for better coordination of risk identification, assessment, and mitigation across the TCG’s various subsidiaries. 

Fourthly, it facilitates the resolution process for material EU activities of non-EU banking groups. Having a transparent, EU-based IPU can facilitate the implementation of resolution measures, if necessary, helping to protect financial stability and minimize the impact on the broader economy. 

In practice

In a nutshell, establishing an IPU is all about consolidation. The term ’consolidation’ is used to refer to any business combination of pre-existing independent legal entities that is relevant from the perspective of prudential supervision of institutions by the Single Supervisory Mechanism (SSM). The reorganization of banking/investment activities can bring benefits, which nevertheless need to be weighed up against the potential risks. Indeed, if well designed and executed, business combinations can contribute to the overall financial soundness of the banking system without weakening the diversity of different business models. 

Establishing an IPU means that one of the EU subsidiaries will have to consolidate the entire EU group. This can either be done by relocating the EU subsidiaries in the group structure, so that one of these becomes the IPU, or by establishing a new IPU. The IPU can be a (mixed) financial holding company, an EU credit institution or an investment firm. The IPU is the new top parent entity in the EU. 


TCGs that met the IPU threshold at 27 June 2019 and onwards had to establish an IPU by 30 December 2023. As of this date, these TCGs must have the IPU in operation when the threshold is met. The guidance from the European Banking Authority (EBA) provides a backward-looking and forward-looking element. The TCG should calculate the total value of assets in the EU of the group in its entirety at least on a quarterly basis, and assess whether the threshold has been reached, exceeded or not exceeded. Once established, only the IPU should conduct these calculations and the quarterly assessments. 

The backward-looking approach is complemented with a forward-looking approach. This means that TCGs should assess, at least annually, whether they meet the IPU requirement, or expect to meet it in the foreseeable future. A three-year time horizon should be taken into account, based on the strategic planning of the group and the forecast of assets. 

We advise large international banking groups to liaise with their supervisor on their plans for complying with the IPU requirement. Furthermore, TCGs should get familiar with the relevant procedures and start the related preparations at an early stage. 

In the next blog, we will provide guidance on the actual design of the IPU.   

Connect with us

Joost Lensen 
Director, Financial Risk Management
KPMG in the Netherlands 

Welmoed Rentes
Senior Consultant, Financial Risk Management
KPMG in the Netherlands 

Sarab Zainel
Consultant, Financial Risk Management
KPMG in the Netherlands 

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