Recital 58

(58)When a credit institution incurs an exposure to its own parent undertaking or to other subsidiaries of its parent undertaking, particular prudence is necessary. The management of exposures incurred by credit institutions must be carried out in a fully autonomous manner, in accordance with the principles of sound banking management, without regard to any considerations other than those principles. The provision of this Directive require that where the influence exercised by persons directly or indirectly holding a qualifying participation in a credit institution is likely to operate to the detriment of the sound and prudent management of that institution, the competent authorities shall take appropriate measures to put an end to that situation. In the field of large exposures, specific standards should also be laid down for exposures incurred by a credit institution to its own group, and in such cases more stringent restrictions are justified than for other exposures. More stringent restrictions need not, however be applied where the parent undertaking is a financial holding company or a credit institution or where the other subsidiaries are either credit or financial institutions or undertakings offering ancillary banking services, provided that all such undertakings are covered by the supervision of the credit institution on a consolidated basis. In such cases the consolidated monitoring of the group of undertakings allows for an adequate level of supervision, and does not require the imposition of more stringent limits on exposure. Under this approach banking groups will also be encouraged to organise their structures in such a way as to allow consolidated monitoring, which is desirable because a more comprehensive level of monitoring is possible.