# C_2007093EN.01002201.xml

| 27.4.2007 | EN | Official Journal of the European Union | C 93/22 |
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27.4.2007

EN

Official Journal of the European Union

C 93/22

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Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Council Directive 92/49/EC and Directives, 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC of the European Parliament and of the Council as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increases of shareholdings in the financial sector

COM(2006) 507 final — 2006/0166 (COD)

(2007/C 93/05)

On 19 October 2006 the Council decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 10 January 2007. The rapporteur was Mr Retureau.

At its 432nd plenary session held on 17 and 18 January 2007 (meeting of 18 January), the European Economic and Social Committee adopted the following opinion by 124 votes to none, with three abstentions.

1.   Summary of the EESC's conclusions

| 1.1 | The principle of having a restrictive list of criteria and making the necessary information transparent deserves to be supported. A harmonised, or even uniform set of rules would be created in all the Member States, but only for cross-border operations concerning the acquisition or increase of shareholdings in the financial sector (banking, insurance and securities). |
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1.1

The principle of having a restrictive list of criteria and making the necessary information transparent deserves to be supported. A harmonised, or even uniform set of rules would be created in all the Member States, but only for cross-border operations concerning the acquisition or increase of shareholdings in the financial sector (banking, insurance and securities).

| 1.2 | The proposed rules provide businesses and investors with speed, transparency, identical treatment and legal certainty; Member States should align their domestic rules on cross-border transactions accordingly, in order to have a unified set of rules for all operations of the same kind. |
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1.2

The proposed rules provide businesses and investors with speed, transparency, identical treatment and legal certainty; Member States should align their domestic rules on cross-border transactions accordingly, in order to have a unified set of rules for all operations of the same kind.

| 1.3 | Information considered to be incomplete may be a reason for rejecting a bid; additional requests for information should not therefore exceed the list drawn up beforehand or impose additional conditions, and so should not be able to be used as a pretext for an unjustified rejection if all the elements on the list have been made known in a satisfactory manner. |
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1.3

Information considered to be incomplete may be a reason for rejecting a bid; additional requests for information should not therefore exceed the list drawn up beforehand or impose additional conditions, and so should not be able to be used as a pretext for an unjustified rejection if all the elements on the list have been made known in a satisfactory manner.

| 1.4 | The investors concerned should be able to ask for extra time to provide certain additions (things can be complex in companies with many subsidiaries and holdings). In accordance with the general monitoring principles laid down by the directives, the principle of monitoring by the home Member State should also be applied when assessing the reputation of a would-be buyer. For this reason buyers who have already been assessed in one Member State and whose reputation has already been judged as sound, as in the case of enterprises that have their registered office inside the EU, should be exempted from undergoing a new examination, unless new facts have emerged. |
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1.4

The investors concerned should be able to ask for extra time to provide certain additions (things can be complex in companies with many subsidiaries and holdings). In accordance with the general monitoring principles laid down by the directives, the principle of monitoring by the home Member State should also be applied when assessing the reputation of a would-be buyer. For this reason buyers who have already been assessed in one Member State and whose reputation has already been judged as sound, as in the case of enterprises that have their registered office inside the EU, should be exempted from undergoing a new examination, unless new facts have emerged.

| 1.5 | The method chosen by the Commission could indeed turn out to be lacking flexibility in practice, where realities are more or less complex and each case has its peculiarities. |
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1.5

The method chosen by the Commission could indeed turn out to be lacking flexibility in practice, where realities are more or less complex and each case has its peculiarities.

| 1.6 | The risk of a rapid examination is that it could prove to be superficial; monitoring by the Commission should not be limited to cases of rejection, but instead should take the form of surveys from time to time to assess whether or not the directive is being applied properly in the Member States. |
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1.6

The risk of a rapid examination is that it could prove to be superficial; monitoring by the Commission should not be limited to cases of rejection, but instead should take the form of surveys from time to time to assess whether or not the directive is being applied properly in the Member States.

2.   The Commission's proposals

| 2.1 | These consist of a directive amending the Markets in Financial Instruments Directive (MiFID) and several sectoral directives concerning prudential authorisations to acquire or increase holdings in the capital of financial entities (insurance and re-insurance, UCITS management companies and other regulated markets. |
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2.1

These consist of a directive amending the Markets in Financial Instruments Directive (MiFID) and several sectoral directives concerning prudential authorisations to acquire or increase holdings in the capital of financial entities (insurance and re-insurance, UCITS management companies and other regulated markets.

| 2.2 | The proposed amendment to the financial directives (Directive 92/49/EC of the Council and Directives 2002/83/EC, 2004/39/EC (MiFID), 2005/68 EC and 2006/48/EC of the EP and of the Council) as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increases of shareholdings in the financial sector puts forward new rules designed to simplify and clarify the prudential authorisation of mergers and acquisitions in the financial services sector. The proposal encourages and simplifies cross-border consolidation, and is thus opposed to the perceived attitude of the supervisory authorities in certain countries, which are suspected of having blocked cross-border mergers on alleged national interest grounds. |
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2.2

The proposed amendment to the financial directives (Directive 92/49/EC of the Council and Directives 2002/83/EC, 2004/39/EC (MiFID), 2005/68 EC and 2006/48/EC of the EP and of the Council) as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increases of shareholdings in the financial sector puts forward new rules designed to simplify and clarify the prudential authorisation of mergers and acquisitions in the financial services sector. The proposal encourages and simplifies cross-border consolidation, and is thus opposed to the perceived attitude of the supervisory authorities in certain countries, which are suspected of having blocked cross-border mergers on alleged national interest grounds.

| 2.3 | The new rules aim to establish in the European Union a harmonised, rapid and transparent prudential authorisation process for mergers and acquisitions of regulated financial companies. The three-month examination period currently in force would be reduced to thirty working days as from receipt of the request, but this deadline could be extended by ten days if the competent authority considered the submission to be incomplete. The rule will also be applicable to potential purchasers subject to non-EU legislation seeking to acquire or increase their shareholding in an entity within the EU. |
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2.3

The new rules aim to establish in the European Union a harmonised, rapid and transparent prudential authorisation process for mergers and acquisitions of regulated financial companies. The three-month examination period currently in force would be reduced to thirty working days as from receipt of the request, but this deadline could be extended by ten days if the competent authority considered the submission to be incomplete. The rule will also be applicable to potential purchasers subject to non-EU legislation seeking to acquire or increase their shareholding in an entity within the EU.

| 2.4 | The proposal wants to prevent any risk of prudential authorisations being used to obstruct cross-border consolidation. Current legislation applies to domestic or cross-border operations by financial institutions or investment firms. As things stand, the competent authorities have three months to assess a takeover bid and can block it if ‘bearing in mind the need to guarantee sound and careful management of the enterprise concerned, they are not satisfied with the quality of [the purchaser]’. |
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2.4

The proposal wants to prevent any risk of prudential authorisations being used to obstruct cross-border consolidation. Current legislation applies to domestic or cross-border operations by financial institutions or investment firms. As things stand, the competent authorities have three months to assess a takeover bid and can block it if ‘bearing in mind the need to guarantee sound and careful management of the enterprise concerned, they are not satisfied with the quality of [the purchaser]’.

| 2.5 | Member States and their competent authorities were therefore free, to a certain extent, to interpret this single criterion very broadly and to accept, discourage or reject a planned acquisition as they thought fit, in the absence of sufficiently defined criteria. |
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2.5

Member States and their competent authorities were therefore free, to a certain extent, to interpret this single criterion very broadly and to accept, discourage or reject a planned acquisition as they thought fit, in the absence of sufficiently defined criteria.

| 2.6 | The list of evaluation criteria given is restrictive. The main rule is that any natural or legal person, whether acting alone or in concert with others, is obliged to notify the competent authorities of the target company if he intends:






  — | to acquire a holding of 10 % or more of the capital or of the voting rights of an insurance company (or a lower percentage that would make it possible to exert a significant influence on the management of the insurer); or |
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2.6

The list of evaluation criteria given is restrictive. The main rule is that any natural or legal person, whether acting alone or in concert with others, is obliged to notify the competent authorities of the target company if he intends:

—

to acquire a holding of 10 % or more of the capital or of the voting rights of an insurance company (or a lower percentage that would make it possible to exert a significant influence on the management of the insurer); or

| — | to increase such a holding so as to reach or exceed the thresholds of 20 %, 30 % (previously 33 %) or 50 %, or more; |
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to increase such a holding so as to reach or exceed the thresholds of 20 %, 30 % (previously 33 %) or 50 %, or more;

| — | or to acquire the whole of the insurance company. The proposal sets out a number of criteria which the competent authorities should use to consider whether the character of the prospective buyer is suitable and the planned acquisition is financially viable. |
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or to acquire the whole of the insurance company. The proposal sets out a number of criteria which the competent authorities should use to consider whether the character of the prospective buyer is suitable and the planned acquisition is financially viable.

| 2.7 | These criteria will be communicated to all market participants and will be applied uniformly in all the Member States. The competent authority then must only take account of:






  — | the reputation of the potential buyer: the preamble to the draft directive states that this means checking if there are any doubts about the buyer's integrity and professional competence (e.g. as a result of past business conduct) and if these are founded; |
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2.7

These criteria will be communicated to all market participants and will be applied uniformly in all the Member States. The competent authority then must only take account of:

—

the reputation of the potential buyer: the preamble to the draft directive states that this means checking if there are any doubts about the buyer's integrity and professional competence (e.g. as a result of past business conduct) and if these are founded;

| — | the assessment of integrity is considered particularly relevant if the buyer is not another regulated financial institution or an investment undertaking; |
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the assessment of integrity is considered particularly relevant if the buyer is not another regulated financial institution or an investment undertaking;

| — | the reputation and experience of any person who may actually direct the business of the insurance undertaking as a result of the proposed acquisition; |
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the reputation and experience of any person who may actually direct the business of the insurance undertaking as a result of the proposed acquisition;

| — | the financial soundness of the proposed acquirer, in particular in relation to the business pursued and envisaged in the insurance undertaking in which the acquisition is sought; |
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the financial soundness of the proposed acquirer, in particular in relation to the business pursued and envisaged in the insurance undertaking in which the acquisition is sought;

| — | if the insurance undertaking will continue to fulfil the obligations imposed by the prudential and solvency rules laid down by the European Union; |
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if the insurance undertaking will continue to fulfil the obligations imposed by the prudential and solvency rules laid down by the European Union;

| — | whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing is being or has been committed or attempted, or that the proposed acquisition could increase such a risk; |
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whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing is being or has been committed or attempted, or that the proposed acquisition could increase such a risk;

| — | the competent authority receiving notification must acknowledge receipt of it in writing within two working days; |
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the competent authority receiving notification must acknowledge receipt of it in writing within two working days;

| — | the competent authority will then have a maximum of thirty working days (the ‘assessment period’) from the date of the acknowledgement of receipt to assess the proposed acquisition. The assessment period may be increased to a maximum of fifty working days if the prospective buyer is regulated outside the Community and is situated in a non-EU country where there are legal impediments to the transfer of the necessary information; |
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the competent authority will then have a maximum of thirty working days (the ‘assessment period’) from the date of the acknowledgement of receipt to assess the proposed acquisition. The assessment period may be increased to a maximum of fifty working days if the prospective buyer is regulated outside the Community and is situated in a non-EU country where there are legal impediments to the transfer of the necessary information;

| — | the competent authority may, if necessary, request further information from the buyer. While the information required is being provided, the assessment period is suspended for a maximum of ten working days. |
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the competent authority may, if necessary, request further information from the buyer. While the information required is being provided, the assessment period is suspended for a maximum of ten working days.

| 2.8 | Any further requests for information by the authority may not result in an interruption of the assessment period. |
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2.8

Any further requests for information by the authority may not result in an interruption of the assessment period.

| 2.9 | Assessment is limited to prudential matters and aspects relating to the fight against money laundering. The competent authorities will have no discretionary power to impose preconditions as to the size of the holding to be reached, or to study the acquisition in terms of the economic needs of the market. Competing takeover bids for the same target will have to be treated in a non-discriminatory manner. |
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2.9

Assessment is limited to prudential matters and aspects relating to the fight against money laundering. The competent authorities will have no discretionary power to impose preconditions as to the size of the holding to be reached, or to study the acquisition in terms of the economic needs of the market. Competing takeover bids for the same target will have to be treated in a non-discriminatory manner.

| 2.10 | Under the proposals, the Commission will have the right to ask to be informed of the reasons why any authorisation has been granted or opposed, and to request copies of the documents on which the competent authorities based their assessment. |
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2.10

Under the proposals, the Commission will have the right to ask to be informed of the reasons why any authorisation has been granted or opposed, and to request copies of the documents on which the competent authorities based their assessment.

| 2.11 | The Commission will also be able to use its executive powers to propose and decide on any adaptation of the evaluation criteria that may be necessary in order to take account of market trends and of the need for uniform application within the European Union. |
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2.11

The Commission will also be able to use its executive powers to propose and decide on any adaptation of the evaluation criteria that may be necessary in order to take account of market trends and of the need for uniform application within the European Union.

3.   Comments of the Committee

| 3.1 | As regards form: it is logical for directives to be amended by means of one or more directives; and for the amending directive, in this case, to have the same legal basis as the directives that it amends. |
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3.1

As regards form: it is logical for directives to be amended by means of one or more directives; and for the amending directive, in this case, to have the same legal basis as the directives that it amends.

As regards form

3.2   As regards content:

| 3.2.1 | The principle of having a restrictive list of criteria and making the necessary information transparent deserves to be supported. A harmonised, or even uniform set of rules would be created in all the Member States, to facilitate cross-border operations. |
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3.2.1

The principle of having a restrictive list of criteria and making the necessary information transparent deserves to be supported. A harmonised, or even uniform set of rules would be created in all the Member States, to facilitate cross-border operations.

| 3.2.2 | The proposed rules provide businesses and investors with speed, transparency, identical treatment and legal certainty; they can only be interrupted once, in strictly defined circumstances, and in the worse cases cut the decision-making process for operations within the Community to six weeks instead of twelve or thirteen. |
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3.2.2

The proposed rules provide businesses and investors with speed, transparency, identical treatment and legal certainty; they can only be interrupted once, in strictly defined circumstances, and in the worse cases cut the decision-making process for operations within the Community to six weeks instead of twelve or thirteen.

| 3.2.3 | Having said this, the Committee would also point out that, according to the specialists, slightly more than half of all mergers/acquisitions result in failure, that the synergies anticipated are in most cases over-estimated and that in the banking sector, 5 to 10 % of customers leave their bank after the operation. |
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3.2.3

Having said this, the Committee would also point out that, according to the specialists, slightly more than half of all mergers/acquisitions result in failure, that the synergies anticipated are in most cases over-estimated and that in the banking sector, 5 to 10 % of customers leave their bank after the operation.

4.   Specific comments

| 4.1 | The rules on suspending the assessment period and their link with the provision of additional information should be more precise; information considered to be incomplete may be a reason for rejecting a bid; such requests should not be able to be used as a pretext for an unjustified rejection: additional information should not therefore exceed the list drawn up beforehand or impose additional conditions. The investors concerned here should be able to ask for extra time to provide certain additions (things can be complex in companies with many subsidiaries and holdings). |
| --- | --- |

4.1

The rules on suspending the assessment period and their link with the provision of additional information should be more precise; information considered to be incomplete may be a reason for rejecting a bid; such requests should not be able to be used as a pretext for an unjustified rejection: additional information should not therefore exceed the list drawn up beforehand or impose additional conditions. The investors concerned here should be able to ask for extra time to provide certain additions (things can be complex in companies with many subsidiaries and holdings).

| 4.2 | The risk of a rapid examination is that it could prove to be superficial; monitoring by the Commission should not be limited to cases of rejection, but instead should take the form of surveys from time to time. In addition, reservations on the draft amendments have been expressed by the committees that regulate financial services in Europe (the Committee of European Banking Supervisors, the Committee of European Insurance and Occupational Pensions Supervisors, and the Committee of European Securities Regulators). They are concerned about the reduction of the assessment period, the restrictive character of the list of evaluation criteria, cooperation between supervisory authorities in the home Member State and the host Member State, and the power of the Commission to review a decision (a priori negative). |
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4.2

The risk of a rapid examination is that it could prove to be superficial; monitoring by the Commission should not be limited to cases of rejection, but instead should take the form of surveys from time to time. In addition, reservations on the draft amendments have been expressed by the committees that regulate financial services in Europe (the Committee of European Banking Supervisors, the Committee of European Insurance and Occupational Pensions Supervisors, and the Committee of European Securities Regulators). They are concerned about the reduction of the assessment period, the restrictive character of the list of evaluation criteria, cooperation between supervisory authorities in the home Member State and the host Member State, and the power of the Commission to review a decision (a priori negative).

| 4.3 | The method chosen by the Commission, including a number of proposed detailed administrative procedures (e.g. (1) the requirement for the competent authority of the Member State to issue written acknowledgement of the receipt of an application within two working days rather than, as is current practice in the Member States, on delivery; (2) the starting date of the period of time within which the competent authority must examine an application to be the date of issue of the written acknowledgement of receipt of the application rather than the actual date of receipt), could turn out to be lacking flexibility in practice, where realities are more or less complex and each case has its peculiarities. This could make it difficult to achieve the basic aim of the directive, which is to ‘improve the legal certainty, clarity and transparency of the supervisory approval process’. |
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4.3

The method chosen by the Commission, including a number of proposed detailed administrative procedures (e.g. (1) the requirement for the competent authority of the Member State to issue written acknowledgement of the receipt of an application within two working days rather than, as is current practice in the Member States, on delivery; (2) the starting date of the period of time within which the competent authority must examine an application to be the date of issue of the written acknowledgement of receipt of the application rather than the actual date of receipt), could turn out to be lacking flexibility in practice, where realities are more or less complex and each case has its peculiarities. This could make it difficult to achieve the basic aim of the directive, which is to ‘improve the legal certainty, clarity and transparency of the supervisory approval process’.

| 4.4 | In accordance with the general monitoring principles laid down by the directives, the principle of monitoring by the home Member State should also be applied when assessing the reputation of a would-be buyer. For this reason buyers who have already been assessed in one Member State and whose reputation has already been judged as sound, as in the case of enterprises that have their registered office inside the EU, should be exempted from undergoing a new examination, unless new facts have emerged. Consequently, the authority responsible for supervising the target enterprise should not oppose the planned acquisition on the grounds of the supposed lack of reliability of the would-be buyer or his management if such a buyer is an enterprise that has already been checked out by the competent authority of another Member State, which should be consulted by the first authority. A situation where the same enterprise receives divergent assessments from different national authorities should be avoided as far as possible. |
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4.4

In accordance with the general monitoring principles laid down by the directives, the principle of monitoring by the home Member State should also be applied when assessing the reputation of a would-be buyer. For this reason buyers who have already been assessed in one Member State and whose reputation has already been judged as sound, as in the case of enterprises that have their registered office inside the EU, should be exempted from undergoing a new examination, unless new facts have emerged. Consequently, the authority responsible for supervising the target enterprise should not oppose the planned acquisition on the grounds of the supposed lack of reliability of the would-be buyer or his management if such a buyer is an enterprise that has already been checked out by the competent authority of another Member State, which should be consulted by the first authority. A situation where the same enterprise receives divergent assessments from different national authorities should be avoided as far as possible.

| 4.5 | The Committee, which approves the proposed changes, takes the view that the Commission's executive and supervisory powers should, in the light of experience, serve to promote genuine harmonisation in the use of criteria, adjust certain criteria if necessary, and review certain decisions if necessary. |
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4.5

The Committee, which approves the proposed changes, takes the view that the Commission's executive and supervisory powers should, in the light of experience, serve to promote genuine harmonisation in the use of criteria, adjust certain criteria if necessary, and review certain decisions if necessary.

Brussels, 18 January 2007.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS

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