Intragroup capital and liquidity transfer in the European Banking Union

By Pier Paolo Albo

Banking groups are sophisticated corporate structures with multi-layered complexity. The first level of complexity concerns the mismatch between the legal structure and corporate functions. In fact, functional, operational and payment activities are often shared by several entities within the group, ¹ making it more difficult for the supervisors to understand how the group operates and how to intervene in the event of a crisis. The second level of complexity is provided by the nature and business of individual entities. It is common to have in the same group financial intermediaries - without a banking licence - thus involving supervisors from different sectors, with different approaches and requirements, but risks closely linked to other members of the group. A further source of complexity is the ownership structure of banking groups, which may affect corporate governance and the consequent risk of distancing themselves from the parent company's strategy. ²