European Central Bank (ECB) Banking Supervision has published an updated guide explaining how the ECB and national competent authorities assess applications for new and extended credit institution licences under the Single Supervisory Mechanism. Replacing the 2019 guide, it covers classic credit institutions, Class 1 investment firms, bridge banks and other transactions that may require a new or amended licence. The nonbinding guide does not introduce new requirements but consolidates the applicable framework and supervisory practices as part of the ECB’s broader refresh of its guidance. The guide clarifies licensing triggers for changes including cross-border seat transfers, new regulated activities, changes in licence category or legal form, mergers and divisions. Assessments focus on the business plan and organizational structure, governance and fit and proper requirements, shareholders, risk controls, information technology and operational resilience, outsourcing, and money laundering and terrorist financing risks from a prudential perspective. Applicants with higher-risk business models, including fintech banks, may also need to demonstrate a credible orderly exit plan. Capital assessments must establish compliance with initial, risk-based and leverage-based requirements, and where relevant large exposure limits, under baseline and severe but plausible stress scenarios over the first 36 months. The amount needed for the first 12 months must generally be paid up before authorization, while capital required for the second and third years must come from sources assessed as promptly available. Applications enter through the relevant national authority, with the ECB taking the final decision in the common procedure.

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