Large exposures - treatment of connected clients principle on exposures to other group entities outside prudential scope of consolidation

As stated in paragraph 15 (for control relationships) and 27 (for economic dependency) of the EBA Guidelines on connected clients under Article 4(1)(39) of Regulation (EU) No 575/2013 , Institutions should group two or more clients into a group of connected clients on account of a relationship of control or an economic dependency among these clients regardless of whether or not the exposures to these clients are exempted from the application of the large exposures limit under Article 400(1) and (2) CRR or in accordance with exemptions under national rules implementing Article 493(3) CRR. For the determination of the exposure amount that is subject to the large exposure limit, exempted exposures may subsequently be subtracted from the exposure amount that is applicable to the group of connected clients. Group entities that do not fall under the intragroup discretionary exemption described in Article 400(2)(c) of Regulation (EU) No 575/2013 (CRR) – that is undertakings not covered by the supervision on a consolidated basis to which the institution itself is subject - need to be considered as part of the same group of connected clients with group entities covered by the supervision on a consolidated basis if they meet the criteria in Article 4(1)(39) CRR. The same approach applies where, according to Article 493(3)(c) CRR and by way of derogation from Article 400(2)(c) CRR, Members States - and not competent authorities - fully or partially exempt exposures from the application of Article 395(1) CRR.