Recommendation No. 7/2026 (June 25) of the Magyar Nemzeti Bank

on the definition of the concept of group of connected clients under Regulation 575/2013/EU

I. Purpose and Scope of the Recommendation

The purpose of this recommendation is to articulate the expectations of the Magyar Nemzeti Bank (hereinafter: MNB) regarding the definition of the concept of "group of connected clients" (client group) as defined in point 39 of Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions (hereinafter: CRR), thereby increasing the predictability of legal application and facilitating the uniform application of relevant legislation.

In drafting this recommendation, account was taken of Commission Delegated Regulation (EU) 2024/1728 of 6 December 2023 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council by specifying the conditions for the identification of groups of connected clients, as well as the EBA/GL/2017/15 guidelines of the European Banking Authority (hereinafter: EBA) on connected clients within the meaning of point 39 of Article 4(1) of Regulation (EU) No 575/2013 [1].

The addressees of this recommendation are credit institutions and investment firms with their registered office in Hungary, as defined in Act CCXXXVII of 2013 on Credit Institutions and Financial Enterprises (hereinafter: Hpt.) and Act CXXXVIII of 2007 on Investment Firms and Commodity Dealers and Rules on Activities Performed by Them (hereinafter: Bszt.), as well as branches located in Hungary of credit institutions and investment firms with their registered office in a country outside the European Economic Area (third-country credit institutions and investment firms) (hereinafter collectively: Institution).

II. Interpretative Provisions

1. Unless otherwise provided, the concepts used in this recommendation have the meanings assigned to them in the CRR, the Hpt., and the Bszt.

III. Use of the Concept of Client Group

2. In this recommendation, the MNB expects the application of procedures defined for determining the concept of "group of connected clients" (client group) under point 39 of Article 4(1) of the CRR, subject to the following rules:

   a) Regarding the conditions for classification into the retail exposure class under point c) of Article 123(1) and point ii) of Article 147(5)(a) of the CRR; b) Regarding the development and application of rating systems under point d) of Article 172(1) of the CRR; c) Regarding compliance with large exposure limits under Article 395(1) of the CRR; d) Regarding the determination of items subject to supervisory reporting obligations for stable funding requirements under point ii) of Article 428(1)(g) of the CRR; e) Regarding the applicability of the preferential 0.7619 risk weight factor for exposures to small and medium-sized enterprises under point c) of Article 501(2) of the CRR; f) When applying Commission regulations (technical standards) issued based on the authorization of 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, amending Directive 2002/87/EC, repealing Directives 2006/48/EC and 2006/49/EC, and the CRR, as well as MNB recommendations where these use the concept of client group (e.g., liquidity reports).

3. The MNB expects that the Institution shall perform the classification into the client group for every person and organization against which it holds an exposure under the CRR, or with which it plans to enter into a contract involving risk-taking.

IV. Groups of Connected Clients through Control

4. In connection with the application of point a) of Article 4(1)(39) of the CRR, the MNB expects that the Institution shall treat two or more clients as a client group, and thus as a single risk factor, if there is a relationship of control between them. The MNB further expects that, in examining the existence of a control relationship, the Institution shall query and utilize information from databases publicly available in relation to company registers. It is advisable to examine the existence of a control relationship primarily based on publicly accessible databases, declarations of clients regarding their control relationships, and information requested for risk-taking decisions.

5. In exceptional cases, when the Institution can prove that the clients do not form a single risk factor despite the control relationship existing between them, the Institution may refrain from treating them as a single client group. In such cases, it is expected that the Institution documents in detail and comprehensively the circumstances proving this. In the MNB's opinion, this exception rule is applicable only in connection with securitization, given that a special purpose entity controlled by the organization initiating the securitization is completely separated from the initiator of the securitization and cannot be involved in its insolvency proceedings – i.e., risks cannot spread to the client, and therefore the special purpose entity and the organization controlling it do not form a single risk factor (see Example C.1 in the Annex).

6. According to the MNB's expectation, the Institution shall apply the concept of control defined in point 37 of Article 4(1) of the CRR for the identification of client groups as follows:

   a) For clients whose consolidated annual financial statements are prepared in accordance with national rules transposing Directive 2013/34/EU [2], the Institution shall base itself on the control relationship between the parent undertaking and its subsidiaries defined in paragraphs 1 and 2 of Article 22 of Directive 2013/34/EU [3]. The Institution shall classify such clients into groups based on their consolidated annual financial statements. Accordingly, the existence of the control relationship should be interpreted according to the national rules transposing Directive 2013/34/EU in the Member State where the Institution's clients are required to prepare consolidated annual accounts. b) For clients whose consolidated annual financial statements are prepared in accordance with international accounting standards pursuant to Regulation (EC) No 1606/2002 [4], the Institution should base itself on the control relationship between the parent undertaking and its subsidiaries according to international accounting standards. To this end, the Institution should appropriately classify its clients into groups based on their consolidated annual financial statements. c) For clients to whom points a) and b) do not apply (e.g., natural persons, central government, and clients whose consolidated annual financial statements are prepared in accordance with the accounting rules of a third country), the Institution should consider as a control-based relationship any situation where the relationship between any natural or legal person and the given enterprise is similar to the relationship between a parent undertaking and subsidiary defined in points a) and b).

7. In examining the matters set out in point 6, the MNB expects that the Institution shall consider the fulfillment of any of the following criteria as evidence of a control relationship:

   a) Possession of the majority of voting rights held by shareholders or members in another enterprise; b) Right or ability to appoint or remove the majority of the members of the administrative, management, or supervisory bodies of another enterprise; c) Right or ability to exercise decisive influence over another enterprise according to provisions in contracts, articles of association, or statutes.

8. Other possible indicators of control that the Institution should take into account during the examination referred to in point 6:

   a) Power to determine the strategy or direct the activities of an organization; b) Discretionary power regarding fundamental transactions, such as the transfer of profit or loss; c) Right or ability to coordinate the management of the business organization with other organizations to achieve a common goal (e.g., when the same natural persons participate in the management or board of directors of two or more organizations); d) Possession of more than 50% ownership interest in another organization.

9. Given that the decisive factors for the existence of a control relationship are based on the parent-subsidiary relationship prescribed in accounting legislation and the indicators defined in points a)–c) of point 6, the Institution must classify two or more clients into a single client group due to the existence of the control relationship referenced in this recommendation, even if these clients do not appear in the same consolidated annual financial statement because they are exempt from inclusion in consolidated annual financial statements according to relevant accounting rules (e.g., pursuant to Article 23 of Directive 2013/34/EU).

10. Regardless, the Institution should treat two or more clients as connected clients due to the control relationship between them, if exposures towards these clients are exempt from the application of large exposure limits under Articles 400(1) and (2) of the CRR, or based on national rules implementing Article 493(3) of the CRR [5].

11. It is expected that the Institution considers its clients as connected clients even if two or more of its clients depend on an organization through a control-type relationship, even if this organization is not a client of the Institution.

12. The MNB expects that the Institution takes the following into account when examining control-type dependency realized through indirect ownership.
    If it is established for both the indirectly owned enterprise/natural person and the intermediate enterprise that they exercise control over the enterprise directly owned by them, based on the evaluation of points 6–8, the control relationship also exists between the indirectly owned enterprise/natural person and the enterprise affected by indirect ownership.

13. In cases of exposures through investment certificates, in addition to the exposure identification rules contained in Title II, Chapter 2 of Part Three of the CRR, control and economic dependency must also be examined for investment funds, based on fund management regulations, master agreements, contracts, or other documents containing relevant information. Based on the evaluation of information, the Institution must assess the classification of participants involved in the structure into client groups, or examine the further potential connection of these participants to other existing clients or client groups of the Institution(group), taking into account general client group formation requirements.

[1] https://www.eba.europa.eu/documents/10180/2135623/Guidelines+on+connected+clients+%28EBA-GL-2017-15%29_HU.pdf/02242d98-08b2-4877-b96d-b9adf9821f92

V. Alternative Method for Exposures Towards Central Governments

14. In line with the definition of "group of connected clients" under point 39 of Article 4(1) of the CRR, the Institution may separately examine the existence of a group of connected clients for each person directly controlled by or directly linked to the central government ("alternative method") [6].

15. This provision also allows for the partial application of the alternative method, i.e., the separate examination of natural or legal persons directly controlled by the central government or directly linked to the central government (see Example CG.1 in the Annex).

16. In applying the relevant provision of the CRR, it is expected that:

a) The central government is included in all distinct client groups formed by natural or legal persons directly controlled by the central government or directly linked to the central government (see Example CG.2 in the Annex); b) Legal entities that are directly controlled by or directly linked to the legal entities directly controlled by or directly linked to the central government are assigned to those groups of connected clients defined in point a) (see Example CG.3 in the Annex).

17. If legal entities directly controlled by or directly linked to the central government are economically dependent on each other, in addition to the groups of connected clients created according to the alternative method, separate client groups should be formed from these economically dependent clients (excluding the central government) (see Example CG.4 in the Annex).

18. In accordance with the last sentence of point 39 of Article 4(1) of the CRR, this chapter of the recommendation also applies to regional governments or local authorities under Article 115(2) of the CRR, and to natural or legal persons directly controlled by or directly linked to such regional governments or local authorities.

VI. Determination of Connection Based on Economic Dependency

19. In connection with the application of point b) of Article 4(1)(39) of the CRR, the MNB expects that the Institution shall treat two or more clients as a client group, and thus as a single risk factor, if there is a relationship based on economic dependency between them. It is advisable to examine the existence of an economic-type relationship primarily based on clients' declarations regarding this matter, as well as information requested for risk-taking decisions.

20. When identifying connections based on economic dependency under point b) of Article 4(1)(39) of the CRR between clients, the MNB expects that the Institution examines each case individually, taking into account the unique characteristics of the given relationship. It is expected that the Institution primarily examines whether the financial difficulties or bankruptcy of one client could lead to financing or repayment difficulties for the other client (see Examples E.1, E.2, E.3, and E.4 in the Annex).

21. The MNB expects a detailed investigation of economic dependency only in cases where the total balance sheet and off-balance sheet exposure towards clients already identified as a client group due to a single client or due to a control relationship exceeds 5% of the Institution's core capital.

22. If the Institution can prove that the financial difficulties or bankruptcy of one client would not result in financing or repayment difficulties for the other client, these clients need not be considered a single risk factor. Furthermore, two clients need not be considered a single risk factor if, based on the Institution's market position assessment or the client's declaration, it can be determined that one client depends on another client only to a limited extent economically, i.e., one client can easily replace the other client. In these cases, it is expected that the Institution documents in detail the circumstances proving this.

23. With regard to the investigation of economic dependency, the ratios specified in percentage form listed in point 24 of the recommendation are indicative; i.e., exceeding these ratios does not necessarily mean that economic dependency exists, but in case of exceeding the ratios, it is expected that the Institution prominently investigates the possible existence of economic dependency.

24. In investigating the existence of economic dependency, the MNB expects that the Institution pays particular attention to the following situations:

a) When a client has fully or partially provided a guarantee or warranty for the exposure of another client, and this exposure is so significant for the client providing the guarantee or warranty that, upon realization of the guarantee or warranty, it would likely face financial difficulties (thus, particularly if the amount of the guarantee or warranty exceeds 30% of the client's own equity, or if the loss arising from enforcement of the guarantee/warranty reduces the client's cashflow to such an extent that it cannot meet its obligations) [7]; b) When a client, according to its legal status, bears liability as a member of an organization, such as a general partner in a limited partnership, and the exposure is so significant that, in case of claims against the organization, the client would likely face financial difficulties; c) When a significant part of a client's gross income (thus, particularly 40% of net sales revenue on an annual basis) derives from transactions with another client (e.g., an owner of residential/commercial real estate whose tenant pays a significant portion of the rent) and cannot be easily replaced [8]; d) When a significant part of a client's products or services is sold to another client of the Institution (thus, particularly if net sales revenue from the other client on an annual basis exceeds 40% of total revenue), and cannot be easily replaced; e) When a significant part of the inputs required for the production of a client's products or services is supplied by another client of the Institution (thus, particularly if the share of the given supplier within material inputs exceeds 50% on an annual basis), or if the given input is critical from the perspective of the final product, and the given inputs and the supplier cannot be easily replaced; f) When the expected sources of loan repayment for two or more clients are identical, and neither client possesses another source of income usable for loan repayment or refund; g) When the collateral serving as cover for the credit transaction of two or more clients is identical, or forms a risk circle, at least 50% of the market value of the underlying collateral, unless the amount of the collateral is not significant from the perspective of the provider of the collateral. Economic dependency also exists when a client provides collateral for the credit transaction of another client; h) Other cases where clients are jointly liable towards the Institution based on statutory or contractual obligations (e.g., borrower and co-borrower); i) When a significant part of a client's claims or liabilities exists vis-à-vis another client (thus, particularly if it exceeds 20% of the total assets); j) When the owners, shareholders, or senior executives of the clients are identical. This includes, in particular, horizontal groups where one enterprise is connected to one or more other enterprises because they have the same ownership structure without a single controlling owner, or because
these enterprises operate under common control. This control may occur based on agreements between enterprises, or according to provisions in the articles of association or statutes of these enterprises, or in such a way that a large part of the members of the administrative or supervisory bodies of the enterprise and one or more other enterprises are composed of the same persons; k) Clients belonging to the same franchise network, provided that, based on the operation and internal rules of the franchise, economic dependency can reasonably be assumed.

25. The MNB expects the Institution to take into account the criteria listed in point 24 also when examining relationships between organizations conducting shadow banking activities [9].

[2] Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC [3] In Hungary, the existence of a control relationship as formulated in Directive 2013/34/EU should be interpreted according to what is defined in point 1 of paragraph (2) of Section 3 of Act C of 2000 on Accounting. [4] Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards [5] In Hungary, exemptions from large exposure limits are contained in Section 302 of the Hpt. [6] As per point a) of Article 400(1) of the CRR, instrument items representing claims towards central governments, which would be assigned a 0% risk weight under the standard approach in the absence of collateral, are exempt from the application of Article 395(1) of the same Regulation (limits on large exposures). [7] This situation relates to guarantees that do not meet the recognition requirements defined in Title II, Chapter 4 of Part Three of the CRR (Credit Risk Mitigation), and for which, therefore, the Institution cannot apply the substitution method defined in Article 403 of the CRR. [8] A contractual partner is not easily replaceable particularly in cases where the contract between the parties sets a long notice period (at least three years), or the product or service offered by the client cannot be sold to other partners, or only under significantly less favorable terms. [9] Organizations defined as "organizations conducting shadow banking activities outside regulated frameworks for their banking activities" in the EBA/GL/2015/20 guideline titled "Limitations on exposures to shadow banking entities under Article 395(2) of Regulation 575/2013/EU" https://www.eba.europa.eu/sites/default/files/documents/10180/1482770/02a319ec-2e62-42a0-8c95-772247f9e4e6/EBA-GL-2015-20%20GLs%20on%20Shadow%20Banking%20Entities_HU.pdf and organizations subject to MNB Recommendation No. 11/2016. (XII. 1.) on limitations of exposures towards shadow banking entities implementing the EBA guideline.

8/27 consideration. During the investigation, it is also advisable for the institution to consider that the relationships between entities engaged in shadow banking activities are characterized primarily not by ownership links, but by other types of relationships (e.g., actual control, relationships based on contractual obligations, hidden support, or sponsorship of potential reputational risk due to a common corporate group).

26. If a client of an institution is economically dependent on several clients who, however, are not dependent on each other, it is expected that the institution will classify the latter clients into separate groups of connected clients (together with the economically dependent client) (see Example E.3 in the Annex).

27. The institution should classify its clients as connected if two or more of its clients are economically dependent on an entity, even if that entity is not a client of the institution.

28. The MNB expects that the institution will classify two or more clients into a group of connected clients due to the economic dependence between them, even if the exposures towards these clients are exempt from the application of the large exposure limit under Article 400(1) and (2) of the CRR, or under national rules implementing Article 493(3) of the CRR.

29. It is expected that the institution will consider cases where a client's financing difficulties are likely to spill over to another client as a result of one-way or two-way dependence on the same financing source. Clients should not be considered part of a client group solely because their financing sources originate from the same market (e.g., the commercial paper market), or where the clients' dependence on existing financing sources results from their deteriorating creditworthiness and cannot be easily replaced by another financing source.

30. The MNB expects that the institution will consider cases where the common financing source, which results in the classification of clients into a client group, is provided by the institution itself, the institution's financial group, or parties connected to the institution (see Examples E.5 and E.6 in the Annex) 10. The fact that one or more clients are clients of the same institution does not necessarily mean they must be classified as connected clients, if the financing source provided by the institution can be easily replaced.

31. Financial institutions that professionally provide guarantees or joint and several liabilities should not be considered part of a client group with the persons secured by their guarantees or joint and several liabilities. Clients should not be considered part of a client group where the inclusion in the client group would be justified solely by the provision of identical collateral, provided that the collateral was provided by a financial institution, investment firm, or insurance company that professionally provides guarantees or joint and several liabilities.

10 Recital (54) of the CRR defines the following: "In determining whether clients form a group of connected clients and thus whether exposures should be treated as a single risk factor, account should be taken of the risks arising from common sources of significant financing provided by the institution itself, its financial group, or parties connected to it."

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32. The MNB expects that the institution will also examine potential spillover and specific risks arising from the following situations:
    a) use of the same financing entity (e.g., the same bank or special purpose vehicle, which cannot be easily replaced); b) use of similar financing structures; c) reliance on commitments from the same source (e.g., guarantees, credit support for structured transactions, or liquidity facilities without a drawdown obligation), taking into account their solvency, especially when there is a maturity mismatch between the maturity of the underlying assets and the frequency of refinancing needs.

VII. Connection between linkages through control and economic dependence

33. The MNB expects that the institution will first determine which clients are connected through control according to Article 4(1)(39)(a) of the CRR ("control-based group"), and which clients are connected through economic dependence according to Article 4(1)(39)(b) of the CRR. Subsequently, the institution should examine whether the identified groups of connected clients, or parts thereof, should be classified into a client group (e.g., whether groups of clients connected due to economic dependence should be included in a client group connected through control).

34. In the assessment, the institution should examine each case individually, i.e., it is appropriate to identify the possible spillover chain ("domino effect") taking into account the individual circumstances (see Examples C/E.1 and C/E.2 in the Annex).

35. If clients belonging to different groups connected through control are linked through economic dependence, all organizations forming the spillover chain should be appropriately classified into a single client group. Downward spillover should be assumed in all cases where a client is in an economically dependent position and is a leading member of a control-based group (see Example C/E.3 in the Annex). Upward spillover should only be assumed for clients controlling the economically dependent entity if the client exercising control is also economically dependent on the entity that forms the basis of the economic connection between the two control-based groups (see Example C/E.4 in the Annex).

VIII. Control and management procedures for the definition of connected clients

36. The MNB expects that the institution will have comprehensive knowledge of its clients and their relationships, and that the institution will ensure that its employees understand and apply the provisions of this Recommendation.

37. It is appropriate that the determination of possible relationships between clients forms an integral part of the institution's lending and credit monitoring processes, and that the governing body and senior management ensure that appropriate processes for the determination, review, modification, and recording of relationships between clients are established in the institution's internal regulations, as well as documented and implemented in practice.

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38. The MNB expects that the institution will identify all control-based relationships and possible economic dependencies between clients and document them appropriately. It is also expected that the institution will take steps commensurate with the level of risk to uncover control and economic dependence-based relationships, and primarily use readily available information to identify relationships between clients.

39. It is expected that the investigation into economic dependence between clients will be proportional to the level of exposures towards the clients. Therefore, the MNB expects that the institution will supplement its investigations with non-quantifiable or measurable information (soft information), as well as a wide range of information beyond that relating to the clients, whenever the total amount of exposure towards a given client exceeds 5% of the institution's core capital 11.

40. As a consequence of the concept of a client group under Article 4(1)(39) of the CRR, control- and economic dependence-based relationships are to be treated as a (single) risk for the institution(group), on the basis of which the MNB expects that the institution(group) will fully consider the total exposure of the client group when determining the decision-making level.

41. The MNB expects that the institution's highest credit risk decision-making body will make decisions on the approval and continuous monitoring of risk-taking towards client groups towards which the institution's exposure, together with the new risk-taking currently being presented, qualifies as a large exposure under Article 392 of the CRR. If this decision-making body is not the institution's board of directors, it is expected that regular reports will be established for the board of directors on the most important information regarding large exposures (including new risk-taking, restructuring, and rating results). The MNB also expects that the institution's board of directors will discuss the report on the institution's existing large exposure positions at least quarterly.

42. For risk-taking decisions that involve increasing exposure towards a client or client group where the exposure already qualified as a large exposure before the new risk-taking, the decision on the new risk-taking may be exempted from the expectations set out in point 41 regarding the decision-making process, if the increase in exposure due to the new risk-taking is less than 1% of the institution's core capital or 100 million HUF, whichever is lower. In these cases, it is sufficient for the institution to list these risk-takings in the quarterly report prepared for the board of directors within the monitoring process.

11 The threshold in the Recommendation should be calculated based on the institution's core capital when applied at an individual level, and based on the group's consolidated core capital when applied at the group level.

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43. To determine the grouping requirements based on the combination of relationships created through control and economic dependence, the institution should collect information on each of the organizations forming the spillover chain. The institution may not always be able to identify all clients that form a single risk factor if the linkages stem from entities that do not have a business relationship with the institution and are therefore unknown to the institution (see Example Mm.1 in the Annex). However, if an institution becomes aware of linkages through entities outside its client base, it should use this information in examining relationships.

44. The MNB expects that the institution will subject the control and management procedures for the definition of connected clients to regular review to ensure their adequacy, and will also monitor changes in linkages, during periodic credit reviews – but at least annually – and when planning a significant increase in exposure or an increase in exposure limits.

45. For an institution(group) that is required by relevant legal provisions to report on its large exposures on a quarterly basis, the MNB expects that the institution(group) will, to ensure and substantiate the up-to-dateness of the information to be reported in the data submission, conduct – in a documented manner – at least quarterly client group reviews regarding the appropriate composition of clients and client groups with exposures reaching at least 95% of the large exposure limit under Article 395 of the CRR.

46. The MNB's expectations regarding the documentation of client groups are as follows.
    a) Taking into account the diversity of characteristics originating client group relationships, as well as the complexity of some client groups, the MNB considers it appropriate to apply a checklist enumerating the control and economic characteristics according to this Recommendation, at least during the decision-preparation processes related to non-standard lending. The use of a checklist developed according to these criteria, containing appropriate formal and substantive elements, is capable of significantly supporting the client group discovery and transaction proposal processes, including, among other things, the appropriate background documentation and substantiation for the client group scope and decision-makers for the approval level presented in the proposals, as well as for the MNB. b) Detailed documentation of the discovery, regular or extraordinary review of client groups, and the results thereof is expected in all cases. An acceptable form and method of detailed documentation is if the institution details these investigations and their results in a written proposal prepared for the appropriate decision-making body. However, if the creation, review, or modification of a client group does not take place within the framework of a written proposal prepared for the decision-maker approving the client group, the institution is also expected to ensure appropriate documentation in such cases, from which the circumstances and reasons for the creation or modification can be traced back [who the respective client group is, who the members were before and after the modification, what type of characteristic links the members of each client group to each other, what is the reason for the creation or modification, which banking area initiated the creation or modification of the client group, who checked it on a four-eyes basis, who and when approved it, whether the institution(group)'s client group register contains current client group information or whether registration or modification is necessary in it, etc.].

c) For the purpose of legal compliance, the MNB expects that the institution will maintain an up-to-date and comprehensive register of discovered client groups. In the case of an institution group, it is also expected that the register maintained by the group parent will extend to client group relationships at the institution group level.

d) The MNB expects that, to ensure up-to-dateness and comprehensiveness, the institution will establish processes appropriate to the institution group to ensure that client group relationships – including their modifications – are recorded in the client group register within a reasonable time limit. It is expected that for a new client group, this deadline should not exceed the date of signing the risk-taking agreements with the members of the client group, while for the modification of an existing client group, it should be at most five working days from the date of the decision to modify the client group, and exclusively for the classification or modification of retail clients into a client group, at most 30 working days. Furthermore, the MNB expects that the recording in the client group register will be carried out respecting the four-eyes principle, and the fact of the control will be documented. The MNB considers it good practice to develop and apply a data sheet to facilitate recordings, indicating relevant information regarding the recording and modification of client groups, which data sheet can also serve as substantiation for the execution of the four-eyes control of the recording, if the support of the client group register system does not allow for documented control within the system.

IX. Final Provisions

47. The Recommendation is a regulatory instrument issued pursuant to Section 13(2)(i) of Act CXXXIX of 2013 on the Magyar Nemzeti Bank, which does not have binding force for supervised financial organizations. The content of the Recommendation issued by the MNB expresses the requirements imposed by laws, principles and methods recommended for application based on the MNB's practice of law application, market standards and practices.

48. The MNB will monitor and evaluate compliance with the Recommendation among the financial organizations under its supervision, in line with general European supervisory practice, during its control and monitoring activities, during which it is entitled, among other things, to determine groups of connected clients to reflect the actual risk exposure of the institution(group).

49. The MNB draws attention to the fact that the financial organization may make the content of the Recommendation part of its regulations. In this case, the financial organization is entitled to state that the provisions contained in the relevant regulation correspond to the relevant Recommendation issued by the MNB. If the financial organization wishes to include only certain parts of the Recommendation in its regulations, it should avoid referring to the Recommendation, and apply it only with regard to the parts taken from the Recommendation.

50. The MNB expects the affected financial organizations to apply the expectations set out in this Recommendation from July 1, 2026.

51. On July 1, 2026, Recommendation No. 28/2018. (XII. 10.) of the MNB on the definition of the concept of a group of connected clients (client group) under Article 4(1)(39) of Regulation (EU) No 575/2013 shall cease to be in force.

Varga Mihály signed
President of the Magyar Nemzeti Bank

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Annex to Recommendation No. 7/2026 (VI.25.) of the MNB
Examples of the application of the concept of a group of connected clients (client group) under Article 4(1)(39) of the CRR The examples in the Annex demonstrate the MNB's expectations regarding the application of the concept of a group of connected clients (client group) under Article 4(1)(39) of the CRR from the perspective of the reporting institution.

1. Group of clients connected through control

C.1. Example: Exceptional case (clients do not form a single risk factor despite the control relationship between them) The reporting institution has exposures towards all the entities listed below ("A", "B", "C", and "D"). Entity "A" exercises control over entities "B", "C", and "D". Entities "B", "C", and "D" are special purpose economic entities.
To assess whether the entities do not form a single risk factor despite the existence of a control relationship, the reporting institution is expected to examine at least the following factors for each special purpose economic entity (in this example, entities "B", "C", and "D"):
a) The absence of economic dependence or any other factor that could indicate a significant positive correlation between the credit rating of the parent company "A" and the credit rating of the special purpose economic entity ("B", "C", or "D"). It is expected that any dependence on financing sources towards the parent company "A", as well as criteria preventing the carve-out of the special purpose economic entity or the derecognition of securitized assets under applicable accounting rules – among other factors – should be considered as signs of significant positive correlation. b) The specific nature of the special purpose economic entity, particularly with regard to whether it can be excluded from insolvency proceedings (based on Article 300(1) of the CRR) – in the sense that effective measures ensure that in the event of insolvency of the parent company "A", the creditors of the parent company "A" cannot dispose of the assets of the special purpose economic entity –, and that the debt securities issued by the special purpose economic entity typically represent obligations of third parties.

B C D
A

15/27 c) Structural enhancement of securitization, and the carve-out of the obligations of the special purpose economic entity from the obligations of the parent company "A", for example, the existence of provisions in the transaction documentation ensuring service and business continuity. d) Compliance with Article 248 of the CRR regarding equal market conditions. After examining the above factors, the institution may draw the conclusion, for example, that the subsidiaries "B" and "C" and the parent company "A" do not form a single risk factor. As a result, the reporting institution should consider only clients "A" and "D" as a group of connected clients. It is expected that the institution will document these investigations and findings comprehensively.

2. Alternative method for exposures to central governments

The following general example can be used to illustrate the possible examples: four legal entities ("A", "B", "C", and "D") are under the direct control of the central government. Two subsidiaries ("A1"/"A2", "B1"/"B2") are under the direct control of entities "A" and "B". The reporting institution has exposures towards the central government and all the listed entities.

D
A

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CG.1. Example: Alternative method – partial application The reporting institution may choose to carve out only one group ("entity 'A' under the control of the central government and all entities under the control of or economically dependent on entity 'A'"), and treat the other entities in a general manner ("entities 'B', 'C', and 'D' under the control of the central government and all entities under the control of or economically dependent on entity 'B'"):

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CG.2. Example: Alternative method – applicable to all economically directly dependent entities

CG.3. Example: Alternative method – applicable at the first and second levels, not below them

The entities "A", "B", "C", and "D" listed in Examples CG.1 and CG.2 form the "second level", i.e., the level directly under the central government ("first level"). Here, the entire group of connected clients can be carved out separately. However, entities "A1", "A2", "B1", and "B2" are only indirectly connected to the central government. Carve-out is not possible at their level (e.g., entities "A1" and "A2" should be included in the "central government/A" group).

CG.4. Example: "Horizontal relationships" at the "second level" In the following example, entities "A" and "B" are in an economically dependent relationship with each other (financial difficulties of entity "B" may spill over to entity "A"): Assuming that the reporting institution applies the alternative method presented in Example CG.1 only partially, it may form the following groups of connected clients:

3. Determination of linkages based on economic dependence

E.1. Example: Basic case
The reporting institution has exposures towards all the entities listed below ("A", "B", "C", and "D"). Entities "B", "C", and "D" are economically dependent on entity "A". Therefore, for the institution, entity "A" always represents the underlying risk factor. The institution should create a single comprehensive group of connected clients from the entities, rather than three different ones. From this perspective, it is irrelevant that entities "B", "C", and "D" are economically independent of each other.

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Example E.2: Variation of the basic case (no direct exposure to the risk source)

Grouping of clients is expected even if the reporting institution has no direct exposure to entity “A”, but is aware that individual clients (“B”, “C”, and “D”) are economically dependent on entity “A”. If the possible financial difficulties of entity “A” can spill over to clients “B”, “C”, and “D”, then all of them will experience financial difficulties when entity “A” encounters financial problems. Therefore, it is justified to treat these entities as a single risk factor.

Similar to Example E.1, it does not matter that there is no economic dependence between clients “B”, “C”, and “D”. The reason for the requirement to treat them as connected clients is entity “A”, despite the fact that “A” is not a client and therefore does not form part of the group of interconnected clients.

Example E.3: Overlapping groups of connected clients

If an entity is economically dependent on two (or more) other entities [considering that financial difficulties of either of these entities (“A” or “B”) may be sufficient to cause financial difficulties for entity “C”],

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then it is expected to include this entity in the client group of both (or all) other entities:

The argument that exposure to entity “C” is thus taken into account twice is not valid, since exposure to entity “C” should be taken into account as a single risk factor, with respect to two different groups. The large exposure limit should be applied separately (i.e., the limit applies once to exposures to the “A/C” group and once to exposures to the “B/C” group). Entities “A” and “B” are not dependent on each other, so it is not necessary to create a comprehensive group (“A” + “B” + “C”).

Example E.4: Dependency chain

In the case of a “dependency chain”, every entity that is economically dependent on another – even if this dependence is only one-way – should be regarded as a single risk factor.

It would not be appropriate to create three separate groups (“A” + “B”, “B” + “C”, “C” + “D”).

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Example E.5: The reporting institution as a financing source (no grouping requirement)

In the following example, the reporting institution is the sole financing source for three clients.
The institution is not an “external financing source” that links the three clients, nor is it a financing source that is easily substitutable.

Example E.6: The reporting institution as a financing source (grouping requirement)

In the following example, the reporting institution provides liquidity to three special purpose entities or special purpose vehicles (similar structures):

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In such a case, the reporting institution itself may constitute the recognized risk source (underlying risk factor) according to Recital 54 of the CRR 12:

This example does not distinguish whether the liquidity credit lines are directly to the special purpose entity or to the underlying assets within the special purpose entity; what matters is the fact that the liquidity credit lines are likely to be drawn down simultaneously. This example does not take into account the diversification and quality of assets, or reliance on investors in the same sector (e.g., investors operating in the asset-backed securities market), since the single risk factor arises from the use of similar structures and reliance on a single source.

12 According to Recital 54 of the CRR: “In determining whether a group of clients are connected and thus whether exposures should be treated as a single risk factor, account should be taken of risks arising from common sources of significant financing provided by the institution itself, its financial group, or related parties.”

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(e.g., the reporting institution is the institution initiating the securitization and the sponsor of the special purpose entity).

4. The connection between linkages through control and economic dependency

C/E.1 Example: Joint occurrence of relationships based on control and economic dependency (one-way dependency)

In the following example, the reporting institution has exposures to all entities shown in the diagram below. Entity “A1” and “A2” are under the control of entity “A”, and “B1” is under the control of entity “B”. In addition, “B1” is economically dependent on “A2” (one-way dependency):

Grouping requirement: In this example, it is expected to include “B1” in the group of interconnected clients “A” (the group thus consisting of entities “A”, “A1”, “A2”, and “B1”), as well as in the group of interconnected clients “B” (the group thus consisting of entities “B” and “B1”).

In the event of financial difficulties of entity “A”, entity “A2”, and ultimately entity “B1”, will also experience financial difficulties due to their legal (A2) and economic (B1) dependency.

Creating three separate groups (“A” + “A1” + “A2”, “A2” + “B1”, “B” + “B1”) would not be appropriate for determining the risk originating from entity “A”, because “B1”, despite being dependent on “A2” and through it on “A”, would be excluded from the group representing the single risk factor “A”.

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C/E.2 Example: Joint occurrence of relationships based on control and economic dependency (two-way dependency)

In this example, the economic dependency between “A2” and “B1” is not one-way, but mutual:

Grouping requirement: It is expected to include entity “A2” as an addition to group “B”, and entity “B1” as an addition to group “A”:

C/E.3 Example: Downward spillover

In this variation of Example C/E.1, two entities are under the control of “B1” (“B2” and “B3”). In this case, the financial difficulties of entity “A” spill over through entity “A2” and then through entity “B1” to the two subsidiaries of “B1” (downward spillover).

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Grouping requirement:

C/E.4 Example: Upward spillover

The control relationship between entity “B” and entity “B1” does not automatically lead to the classification of entity “B” into the group of interconnected clients “A”, because the financial difficulties of entity “A” are unlikely to cause financial difficulties for entity “B”. However, the controlling entity “B” should be included in group “A” if “B1” constitutes an important part of group “B”, resulting in entity “B” being economically dependent on “B1”. In this case, the financial difficulties of entity “A” spill over not only downward but also upward, to entity “B”, causing financial difficulties for “B” (i.e., thus all entities form a single risk factor).

B
A A1 A2 B1
B2 B3
A
A1 A2 B1
B2 B3
B
B1
B2 B3

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Grouping requirement:

5. Control and handling procedures for the definition of connected clients

Mm.1 Example: Limits on establishing the spillover chain

In the further developed variation of Example C/E.4, the reporting institution has exposures only to entities “A” and “B3”. In this case, it may happen that the reporting institution does not necessarily become aware of the spillover chain and creates the group of interconnected clients improperly.

B
A
A1 A2 B1
B2 B3
A
A1 A2 B1
B2 B3
B

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A
A1 A2
B
B1
B2 B3
B2 B3