1. NCAs shall apply the supervisory approach set out in this Guideline with respect to all less significant supervised entities at the highest level of consolidation within the participating Member States.
2. By way of derogation from paragraph 1, an NCA may decide not to apply the supervisory approach set out in this Guideline to a less significant supervised entity for a given reporting reference date if this less significant supervised entity meets at least one of the following conditions at the highest level of consolidation:
the less significant supervised entity’s total gross carrying amount of non-performing loans and advances represents less than 5 % of the less significant supervised entity’s total gross carrying amount of loans and advances. In calculating the sole ratio that is to be assessed against the threshold of 5 %, loans and advances classified as held for sale, cash balances at central banks and other demand deposits shall be excluded both from the denominator and the numerator;
the less significant supervised entity’s total amount of non-performing exposures within the scope of this Guideline as defined in Article 2(2) represents an insignificant share of the less significant supervised entity’s total amount of non-performing exposures;
the less significant supervised entity is subject to an ongoing orderly wind-down process;
the less significant supervised entity is subject to an ongoing merger with another supervised entity, or is in the process of being acquired by another supervised entity;
the less significant supervised entity is a ‘specialised debt restructurer’ as defined in Article 36(5) of Regulation (EU) No 575/2013;
the less significant supervised entity is subject to specific and factual circumstances that, in the view of the relevant NCA, make the application of this Guideline inappropriate, taking into account the objectives and principles of Regulation (EU) No 1024/2013 and, in particular, the need to ensure the consistent application of high supervisory standards.
3. Following their assessment of paragraph 2, points (a) to (f), NCAs shall accordingly inform the less significant supervised entities established in their respective Member States to which the framework set out in this Guideline, and the associated reporting requirements defined in Article 7, apply for a given reporting reference date.
4. NCAs shall inform the ECB on a regular basis of the application of the exemptions applied pursuant to paragraph 2, including the underlying assessments of the NCAs concerned.