2000L0012 — EN — 13.04.2005 — 005.002

This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents

►B DIRECTIVE 2000/12/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (OJ L 126, 26.5.2000, p.1)

Amended by:





Amended by:





Corrected by:









▼B

DIRECTIVE 2000/12/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 20 March 2000

relating to the taking up and pursuit of the business of credit institutions

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular the first and third sentences of Article 47(2) thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the Economic and Social Committee ( 1 ),

Acting in accordance with the procedure laid down in Article 251 of the Treaty ( 2 ),

Whereas:

(1) Council Directive 73/183/EEC of 28 June 1973 on the abolition of restrictions on freedom of establishment and freedom to provide services in respect of self-employed activities of banks and other financial institutions ( 3 ), first Council Directive (77/780/EEC) of 12 December 1977 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions ( 4 ), Council Directive 89/299/EEC of 17 April 1989 on the own funds of credit institutions ( 5 ), second Council Directive 89/646/EEC of 15 December 1989 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions ( 6 ), Council Directive 89/647/EEC of 18 December 1989 on a solvency ratio for credit institutions ( 7 ), Council Directive 92/30/EEC of 6 April 1992 on the supervision of credit institutions on a consolidated basis ( 8 ), and Council Directive 92/121/EEC of 21 December 1992 on the monitoring and control of large exposures of credit institutions ( 9 ) have been frequently and substantially amended. For reasons of clarity and rationality, the said Directives therefore, should be codified and combined in a single text.

(2) Pursuant to the Treaty, any discriminatory treatment with regard to establishment and to the provision of services, based either on nationality or on the fact that an undertaking is not established in the Member State where the services are provided, is prohibited.

(3) In order to make it easier to take up and pursue the business of credit institutions, it is necessary to eliminate the most obstructive differences between the laws of the Member States as regards the rules to which these institutions are subject.

(4) This Directive constitutes the essential instrument for the achievement of the internal market, a course determined by the Single European Act and set out in timetable form in the Commission's White Paper, from the point of view of both the freedom of establishment and the freedom to provide financial services, in the field of credit institutions.

(5) Measures to coordinate credit institutions must, both in order to protect savings and to create equal conditions of competition between these institutions, apply to all of them. Due regard must be had, where applicable, to the objective differences in their statutes and their proper aims as laid down by national laws.

(6) The scope of those measures should therefore be as broad as possible, covering all institutions whose business is to receive repayable funds from the public, whether in the form of deposits or in other forms such as the continuing issue of bonds and other comparable securities and to grant credits for their own account. Exceptions must be provided for in the case of certain credit institutions to which this Directive cannot apply. The provisions of this Directive shall not prejudice the application of national laws which provide for special supplementary authorisations permitting credit institutions to carry on specific activities or undertake specific kinds of operations.

(7) The approach which has been adopted is to achieve only the essential harmonisation necessary and sufficient to secure the mutual recognition of authorisation and of prudential supervision systems, making possible the granting of a single licence recognised throughout the Community and the application of the principle of home Member State prudential supervision. Therefore, the requirement that a programme of operations must be produced should be seen merely as a factor enabling the competent authorities to decide on the basis of more precise information using objective criteria. A measure of flexibility may none the less be possible as regards the requirements on the legal form of credit institutions of the protection of banking names.

(8) Equivalent financial requirement for credit institutions are necessary to ensure similar safeguards for savers and fair conditions of competition between comparable groups of credit institutions. Pending further coordination, appropriate structural ratios should be formulated that will make it possible within the framework of cooperation between national authorities to observe, in accordance with standard methods, the position of comparable types of credit institutions. This procedure should help to bring about the gradual approximation of the systems of coefficients established and applied by the Member States. It is necessary, however to make a distinction between coefficients intended to ensure the sound management of credit institutions and those established for the purposes of economic and monetary policy.

(9) The principles of mutual recognition and home Member State supervision require that Member States' competent authorities should not grant or should withdraw authorisation where factors such as content of the activities programmes, the geographical distribution or the activities actually carried on indicate clearly that a credit institution has opted for the legal system of one Member State for the purpose of evading the stricter standards in force in another Member State within whose territory it carries on or intends to carry on the greater part of its activities. A credit institution which is a legal person must be authorised in the Member State in which it has its registered office. A credit institution which is not a legal person must have its head office in the Member State in which it has been authorised. In addition, Member States must require that a credit institution's head office always be situated in its home Member State and that it actually operates there.

(10) The competent authorities should not authorise or continue the authorisation of a credit institution where they are liable to be prevented from effectively exercising their supervisory functions by the close links between that institution and other natural or legal persons. Credit institutions already authorised must also satisfy the competent authorities in that respect. The definition of ‘close links’ in this Directive lays down minimum criteria. That does not prevent Member States from applying it to situations other than those envisaged by the definition. The sole fact of having acquired a significant proportion of a company's capital does not constitute participation, within the meaning of ‘close links’, if that holding has been acquired solely as a temporary investment which does not make it possible to exercise influence over the structure or financial policy of the institution.

(11) The reference to the supervisory authorities' effective exercise of their supervisory functions covers supervision on a consolidated basis which must be exercised over a credit institution where the provisions of Community law so provide. In such cases, the authorities applied to for authorisation must be able to identify the authorities competent to exercise supervision on a consolidated basis over that credit institution.

(12) The home Member State may also establish rules stricter than those laid down in Article 5(1), first subparagraph and (2), and Articles 7, 16, 30, 51 and 65 for institutions authorised by its competent authorities.

(13) The abolition of the authorisation requirement with respect to the branches of Community credit institutions necessitates the abolition of endowment capital.

(14) By virtue of mutual recognition, the approach chosen permits credit institutions authorised in their home Member States to carry on, throughout the Community, any or all of the activities listed in Annex I by establishing branches or by providing services. The carrying-on of activities not listed in the said Annex enjoys the right of establishment and the freedom to provide services under the general provisions of the Treaty.

(15) It is appropriate, however to extend mutual recognition to the activities listed in Annex I when they are carried on by financial institutions which are subsidiaries of credit institutions, provided that such subsidiaries are covered by the consolidated supervision of their parent undertakings and meet certain strict conditions.

(16) The host Member State may, in connection with the exercise of the right of establishment and the freedom to provide services, require compliance with specific provisions of its own national laws or regulations on the part of institutions not authorised as credit institutions in their home Member States and with regard to activities not listed in Annex I provided that, on the one hand, such provisions are compatible with Community law and are intended to protect the general good and that, on the other hand, such institutions or such activities are not subject to equivalent rules under this legislation or regulations of their home Member States.

(17) The Member States must ensure that there are no obstacles to carrying on activities receiving mutual recognition in the same manner as in the home Member State, as long as the latter do not conflict with legal provisions protecting the general good in the host Member State.

(18) There is a necessary link between the objective of this Directive and the liberalisation of capital movements being brought about by other Community legislation. In any case the measures regarding the liberalisation of banking services must be in harmony with the measures liberalising capital movements.

(19) The rules governing branches of credit institutions having their head office outside the Community should be analogous in all Member States. It is important at the present time to provide that such rules may not be more favourable than those for branches of institutions from another Member State. It should be specified that the Community may conclude agreements with third countries providing for the application of rules which accord such branches the same treatment throughout its territory, account being taken of the principle of reciprocity. The branches of credit institutions authorised in third countries do not enjoy the freedom to provide services under the second paragraph of Article 49 of the Treaty or the freedom of establishment in Member States other than those in which they are established. However, requests for the authorisation of subsidiaries or of the acquisition of holdings made by undertakings governed by the laws of third countries are subject to a procedure intended to ensure that Community credit institutions receive reciprocal treatment in the third countries in question.

(20) The authorisations granted to credit institutions by the competent national authorities pursuant to this Directive have Community-wide, and no longer merely nationwide, application. Existing reciprocity clauses have therefore no effect. A flexible procedure is therefore needed to make it possible to assess reciprocity on a Community basis. The aim of this procedure is not to close the Community's financial markets but rather, as the Community intends to keep its financial markets open to the rest of the world, to improve the liberalisation of the global financial markets in other third countries. To that end, this Directive provides for procedures for negotiating with third countries and, as a last resort, for the possibility of taking measures involving the suspension of new applications for authorisation or the restriction of new authorisations.

(21) It is desirable that agreement should be reached, on the basis of reciprocity, between the Community and third countries with a view to allowing the practical exercise of consolidated supervision over the largest possible geographical area.

(22) Responsibility for supervising the financial soundness of a credit institution, and in particular its solvency, rests with the competent authorities of its home Member State. The host Member State's competent authorities retain responsibility for the supervision of liquidity and monetary policy. The supervision of market risk must be the subject of close cooperation between the competent authorities of the home and host Member States.

(23) The smooth operation of the internal banking market requires not only legal rules but also close and regular cooperation between the competent authorities of the Member States. For the consideration of problems concerning individual credit institutions the ‘groupe de contact’ (contact group) set up between the banking supervisory authorities remains the most appropriate forum. That group is a suitable body for the mutual exchange of information provided for in Article 28.

(24) That mutual information procedure does not in any case replace the bilateral collaboration established by Article 28. The competent host Member State authorities can, without prejudice to their powers of proper control, continue either, in an emergency, on their own initiative or following the initiative of the competent home Member State authorities, to verify that the activities of a credit institution established within their territories comply with the relevant laws and with the principles of sound administrative and accounting procedures and adequate internal control.

(25) It is appropriate to allow the exchange of information between the competent authorities and authorities or bodies which, by virtue of their function, help to strengthen the stability of the financial system. In order to preserve the confidential nature of the information forwarded, the list of addressees must remain within strict limits.

(26) Certain behaviour, such as fraud and insider offences, is liable to affect the stability, including the integrity, of the financial system, even when involving institutions other than credit institutions.

(27) It is necessary to specify the conditions under which such exchanges of information are authorised.

(28) Where it is stipulated that information may be disclosed only with the express agreement of the competent authorities, these may, where appropriate, make their agreement subject to compliance with strict conditions.

(29) Exchanges of information between, on the one hand, the competent authorities and, on the other, central banks and other bodies with a similar function in their capacity as monetary authorities and, where appropriate, other public authorities responsible for supervising payment systems should also be authorised.

(30) For the purpose of strengthening the prudential supervision of credit institutions and protection of clients of credit institutions, it should be stipulated that an auditor must have a duty to report promptly to the competent authorities, wherever, as provided for by this Directive, he becomes aware, while carrying out his tasks, of certain facts which are liable to have a serious effect on the financial situation or the administrative and accounting organisation of a credit institution. Having regard to the aim in view, it is desirable for the Member State to provide that such a duty should apply in all circumstances where such facts are discovered by an auditor during the performance of his tasks in an undertaking which has close links with a credit institution. The duty of auditors to communicate, where appropriate, to the competent authorities certain facts and decisions concerning a credit institution which they discover during the performance of their tasks in a non-financial undertaking does not in itself change the nature of their tasks in that undertaking nor the manner in which they must perform those tasks in that undertaking.

(31) Common basic standards for the own funds of credit institutions are a key factor in the creation of an internal banking market since own funds serve to ensure the continuity of credit institutions and to protect savings. Such harmonisation strengthens the supervision of credit institutions and contributes to further coordination in the banking sector.

(32) Such standards must apply to all credit institutions authorised in the Community.

(33) The own funds of a credit institutions can serve to absorb losses which are not matched by a sufficient volume of profits. The own funds also serve as an important yardstick for the competent authorities, in particular for the assessment of the solvency of credit institutions and for other prudential purposes.

(34) Credit institutions, in an internal banking market, engage in direct competition with each other, and the definitions and standards pertaining to own funds must therefore be equivalent. To that end, the criteria for determining the composition of own funds must not be left solely to Member States. The adoption of common basic standards will be in the best interests of the Community in that it will prevent distortions of competition and will strengthen the Community banking system.

(35) The definition of own funds laid down in this Directive provides for a maximum of items and qualifying amounts, leaving it to the discretion of each Member State to use all or some of such items or to adopt lower ceilings for the qualifying amounts.

(36) This Directive specifies the qualifying criteria for certain own funds items, and the Member States remain free to apply more stringent provisions.

(37) At the initial stage common basic standards are defined in broad terms in order to encompass all the items making up own funds in the different Member States.

(38) According to the nature of the items making up own funds, this Directive distinguishes between on the one hand, items constituting original own funds and, on the other, those constituting additional own funds.

(39) To reflect the fact that items constituting additional own funds are not of the same nature as those constituting original own funds, the amount of the former included in own funds must not exceed the original own funds. Moreover, the amount of certain items of additional own funds included must not exceed one half of the original own funds.

(40) In order to avoid distortions of competition, public credit institutions must not include in their own funds guarantees granted them by the Member States or local authorities.

(41) Whenever in the course of supervision it is necessary to determine the amount of the consolidated own funds of a group of credit institutions, the calculation shall be effected in accordance with this Directive.

(42) The precise accounting technique to be used for the calculation of own funds, the solvency ratio, and for the assessment of the concentration of exposures must take account of the provisions of Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions ( 10 ), which incorporates certain adaptations of the provisions of Council Directive 83/349/EEC of 13 June 1983 based on Article 44(2)(g) of the Treaty on consolidated accounts ( 11 ).

(43) The provisions on own funds form part of the wider international effort to bring about approximation of the rules in force in major countries regarding the adequacy of own funds.

(44) The Commission will draw up a report and periodically examine, with the aim of tightening them, the provisions on own funds and thus achieving greater convergence on a common definition of own funds. Such convergence will allow the alignment of Community credit institutions' own funds.

(45) The provisions on solvency ratios are the outcome of work carried out by the Banking Advisory Committee which is responsible for making suggestions to the Commission with a view to coordinating the coefficients applicable in the Member States.

(46) The establishment of an appropriate solvency ratio plays a central role in the supervision of credit institutions.

(47) A ratio which weights assets and off-balance-sheet items according to the degree of credit risk is a particularly useful measure of solvency.

(48) The development of common standards for own funds in relation to assets and off-balance-sheet items exposed to credit risk is, accordingly, an essential aspect of the harmonisation necessary for the achievement of the mutual recognition of supervision techniques and thus the completion of the internal banking market.

(49) In that respect, the provisions on a solvency ratio must be considered in conjunction with other specific instruments also harmonising the fundamental techniques of the supervision of credit institutions.

(50) In an internal banking market, institutions are required to enter into direct competition with one another and the common solvency standards in the form of a minimum ratio prevent distortions of competition and strengthen the Community banking system.

(51) This Directive provides for different weightings to be given to guarantees issued by different financial institutions. The Commission accordingly undertakes to examine whether this Directive taken as a whole significantly distorts competition between credit institutions and insurance undertakings and, in the light of that examination, to consider whether any remedial measures are justified.

(52) Annex III lays down the treatment of off-balance-sheet items in the context of the calculation of credit institutions' capital requirements. With a view to the smooth functioning of the internal market and in particular with a view to ensuring a level playing field Member States are obliged to strive for uniform assessment of contractual netting agreements by their competent authorities. Annex III takes account of the work of an international forum of banking supervisors on the supervisory recognition of bilateral netting, in particular the possibility of calculating the own-funds requirements for certain transactions on the basis of a net rather than a gross amount provided that there are legally binding agreements which ensure that the credit risk is confined to the net amount. For internationally active credit institutions and groups of credit institutions in a wide range of third countries, which compete with Community credit institutions, the rules adopted on the wider international level will result in a refined supervisory treatment of over-the-counter (OTC) derivative instruments. This refinement results in a more appropriate compulsory capital cover taking into account the risk-reducing effects of supervisorily recognised contractual netting agreements on potential future credit risks. The clearing of OTC derivative instruments provided by clearing houses acting as a central counterparty plays an important role in certain Member States. It is appropriate to recognise the benefits from such a clearing in terms of a reduction of credit risk and related systemic risk in the prudential treatment of credit risk. It is necessary for the current and potential future exposures arising from cleared OTC derivatives contracts to be fully collateralised and for the risk of a build-up of the clearing house's exposures beyond the market value of posted collateral to be eliminated in order for cleared OTC derivatives to be granted for a transitional period the same prudential treatment as exchange-traded derivatives. The competent authorities must be satisfied as to the level of the initial margins and variation margins required and the quality of and the level of protection provided by the posted collateral. For credit institutions incorporated in the Member States, Annex III creates a similar possibility for the recognition of bilateral netting by the competent authorities and thereby offers them equal conditions of competition. The rules are both well balanced and appropriate for the further reinforcement of the application of prudential supervisory measures to credit institutions. The competent authorities in the Member States should ensure that the calculation of add-ons is based on effective rather than apparent national amounts.

(53) The minimum ratio provided for in this Directive reinforces the capital of credit institutions in the Community. A level of 8 % has been adopted following a statistical survey of capital requirements in force at the beginning of 1988.

(54) The essential rules for monitoring large exposures of credit institutions should be harmonised. Member States should still be able to adopt provisions more stringent than those provided for by this Directive.

(55) The monitoring and control of a credit institution's exposures is an integral part of its supervision. Excessive concentration of exposures to a single client or group of connected clients may result in an unacceptable risk of loss. Such a situation may be considered prejudicial to the solvency of a credit institution.

(56) In an internal banking market, credit institutions are engaged in direct competition with one another and monitoring requirements throughout the Community should therefore be equivalent. To that end, the criteria applied to determining the concentration of exposures must be the subject of legally binding rules at Community level and cannot be left entirely to the discretion of the Member States. The adoption of common rules will therefore best serve the Community's interests, since it will prevent differences in the conditions of competition, while strengthening the Community's banking system.

(57) The provisions on a solvency ratio for credit institutions include a list of credit risks which may be incurred by credit institutions. That list should therefore be used also for the definition of exposures for the purposes of limits to large exposures. It is not, however, appropriate to refer on principle to the weightings or degrees of risk laid down in the said provisions. Those weightings and degrees of risk were devised for the purpose of establishing a general solvency requirement to cover the credit risk of credit institutions. In the context of the regulation of large exposures, the aim is to limit the maximum loss that a credit institution may incur through any single client or group of connected clients. It is therefore appropriate to adopt a prudent approach in which, as a general rule, account is taken of the nominal value of exposures, but no weightings or degrees of risk are applied.

(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.

(59) In order to be effective, supervision on a consolidated basis must be applied to all banking groups, including those the parent undertakings of which are not credit institutions. The competent authorities must hold the necessary legal instruments to be able to exercise such supervision.

(60) In the case of groups with diversified activities the parent undertakings of which control at least one credit institution subsidiary, the competent authorities must be able to assess the financial situation of a credit institution in such a group. Pending subsequent coordination, the Member States may lay down appropriate methods of consolidation for the achievement of the objective of this Directive. The competent authorities must at least have the means of obtaining from all undertakings within a group the information necessary for the performance of their function. Cooperation between the authorities responsible for the supervision of different financial sectors must be established in the case of groups of undertakings carrying on a range of financial activities.

(61) The Member States can, furthermore, refuse or withdraw banking authorisation in the case of certain group structures considered inappropriate for carrying on banking activities, in particular because such structures could not be supervised effectively. In this respect the competent authorities have the powers mentioned in the first subparagraph of Article 7(1), Article 7(2), point (c) of Article 14(l), and Article 16 of this Directive, in order to ensure the sound and prudent management of credit institutions.

(62) The Member States can equally apply appropriate supervision techniques to groups with structures not covered by this Directive. If such structures become common, this Directive should be extended to cover them.

(63) Supervision on a consolidated basis must take in all activities defined in Annex I. All undertakings principally engaged in such activities must therefore be included in supervision on a consolidated basis. As a result, the definition of financial institutions must be widened in order to cover such activities.

(64) Directive 86/635/EEC, together with Directive 83/349/EEC, established the rules of consolidation applicable to consolidated accounts published by credit institutions. It is therefore possible to define more precisely the methods to be used in prudential supervision exercised on a consolidated basis.

(65) Supervision of credit institutions on a consolidated basis must be aimed at, in particular, protecting the interests of the depositors of the said institutions and ensuring the stability of the financial system.

(66) The examination of problems connected with matters covered by this Directive as well as by other Directive on the business of credit institutions requires cooperation between the competent authorities and the Commission within a banking advisory committee, particularly when conducted with a view to closer coordination. The Banking Advisory Committee of the competent authorities of the Member States does not rule out other forms of cooperation between authorities which supervise the taking up and pursuit of the business of credit institutions and, in particular, cooperation within the ‘groupe de contact’ (contact group) set up between the banking supervisory authorities.

(67) Technical modifications to the detailed rules laid down in this Directive may from time to time be necessary to take account of new developments in the banking sector. The Commission shall accordingly make such modifications as are necessary, after consulting the Banking Advisory Committee, within the limits of the implementing powers conferred on the Commission by the Treaty. The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission ( 12 ).

(68) Article 36(1) of this Directive permits joint and several commitments of borrowers in the case of credit institutions organised as cooperative societies or funds to be treated as own funds items under Article 34(2)(7). The Danish Government has expressed a strong interest in having its few mortgage credit institutions organised as cooperative societies or funds converted into public limited liability companies. In order to facilitate the conversion or to make it possible, a temporary derogation allowing them to include part of their joint and several commitments as own funds is required. This temporary derogation should not adversely affect competition between credit institutions.

(69) The application of a 20 % weighting to credit institutions' holdings of mortgage bonds may unsettle a national financial market on which such instruments play a preponderant role. In this case, provisional measures are taken to apply a 10 % risk weighting. The market for securitisation is undergoing rapid development. It is therefore desirable that the Commission should examine with the Member States the prudential treatment of asset-backed securities and put forward, before 22 June 1999, proposals aimed at adapting existing legislation in order to define an appropriate prudential treatment for asset-backed securities. The competent authorities may authorise a 50 % weighting to assets secured by mortgages on offices or on multipurpose commercial premises until 31 December 2006. The property to which the mortgage relates must be subject to rigorous assessment criteria and regular revaluation to take account of the developments in the commercial property market. The property must be either occupied or let by the owner. Loans for property development are excluded from this 50 % weighting.

(70) In order to ensure harmonious application of the provisions on large exposures, Member States should be allowed to provide for the two-stage application of the new limits. For smaller credit institutions, a longer transitional period may be warranted inasmuch as too rapid an application of the 25 % rule could reduce their lending activity too abruptly.

(71) Moreover, the harmonisation of the conditions relating to the reorganisation and winding-up of credit institutions is also proceeding.

(72) The arrangements necessary for the supervision of liquidity risks will also have to be harmonised.

(73) This Directive must no affect to obligations of the Member States concerning the deadlines for transposition set out in Annex V, Part B,

HAVE ADOPTED THIS DIRECTIVE:

CONTENTS TITLE I DEFINITIONS AND SCOPE Article 1 Definitions Article 2 Scope Article 3 Prohibition for undertakings other than credit institutions from carrying on the business of taking deposits or other repayable funds from the public TITLE II REQUIREMENTS FOR ACCESS TO THE TAKING UP AND PURSUIT OF THE BUSINESS OF CREDIT INSTITUTIONS Article 4 Authorisation Article 5 Initial capital Article 6 Management body and place of the head office of credit institutions Article 7 Shareholders and members Article 8 Programme of operations and structural organisation Article 9 Economic needs Article 10 Authorisation refusal Article 11 Notification of the authorisation to the Commission Article 12 Prior consultation with the competent authorities of other Member States Article 13 Branches of credit institutions authorised in another Member State Article 14 Withdrawal of authorisation Article 15 Name Article 16 Qualifying holding in a credit institution Article 17 Procedures and internal control mechanisms TITLE III PROVISIONS CONCERNING THE FREEDOM OF ESTABLISHMENT AND THE FREEDOM TO PROVIDE SERVICES Article 18 Credit institutions Article 19 Financial institutions Article 20 Exercise of the right of establishment Article 21 Exercise of the freedom to provide services Article 22 Power of the competent authorities of the host Member State TITLE IV RELATIONS WITH THIRD COUNTRIES Article 23 Notification of the subsidiaries of third countries' undertakings and conditions of access to the markets of these countries Article 24 Branches of credit institutions having their head offices outside the Community Article 25 Cooperation with third countries' competent authorities regarding supervision on a consolidated basis TITLE V PRINCIPLES AND TECHNICAL INSTRUMENTS FOR PRUDENTIAL SUPERVISION Chapter 1 Principles of prudential supervision Article 26 Competence of control of the home Member State Article 27 Competence of the host Member State Article 28 Collaboration concerning supervision Article 29 On-the-spot verification of branches established in another Member State Article 30 Exchange of information and professional secrecy Article 31 Duty of persons responsible for the legal control of annual and consolidated accounts Article 32 Power of sanction of the competent authorities Article 33 Right to apply to the courts Chapter 2 Technical instruments of prudential supervision Section 1 Own funds Article 34 General principles Article 35 Other items Article 36 Other provisions concerning own funds Article 37 Calculation of own funds on a consolidated basis Article 38 Deductions and limits Article 39 Provision of proof to the competent authorities Section 2 Solvency ratio Article 40 General principles Article 41 The numerator: own funds Article 42 The denominator: risk-adjusted assets and off-balance-sheet items Article 43 Risk weightings Article 44 Weighting of claims for regional governments or local authorities of the Member States Article 45 Other weighting Article 46 Administrative bodies and non-commercial undertakings Article 47 Solvency ratio level Section 3 Large exposures Article 48 Reporting of large exposures Article 49 Limits on large exposures Article 50 Supervision on a consolidated or unconsolidated basis of large exposures Section 4 Qualifiying holdings outside the financial sector Article 51 Limits to non-financial qualifying holdings Chapter 3 Supervision on a consolidated basis Article 52 Supervision on a consolidated basis of credit institutions Article 53 Competent authorities responsible for exercising supervision on a consolidated basis Article 54 Form and extent of consolidation Article 55 Information to be supplied by mixed-activity holding companies and their subisidiaries Article 56 Measures to facilitate supervision on a consolidated basis TITLE VI BANKING ADVISORY COMMITTEE Article 57 Composition and tasks of the Banking Advisory Committee Article 58 Examination of the requirements for authorisation Article 59 Observation ratios TITLE VII POWERS OF EXECUTION Article 60 Technical adaptations TITLE VIII TRANSITIONAL AND FINAL PROVISIONS Chapter 1 Transitional provisions Article 61 Transitional provisions regarding Article 36 Article 62 Transitional provisions regarding Article 43 Article 63 Transitional provisions regarding Article 47 Article 64 Transitional provisions regarding Article 49 Article 65 Transitional provisions regarding Article 51 Chapter 2 Final provisions Article 66 Commission information Article 67 Repealed Directives45 Article 68 Implementation45 Article 69 Addressees ANNEX I List of activities subject to mutual recognition ANNEX II Classification of off-balance-sheet items ANNEX III The treatment of off-balance-sheet items ANNEX IV Types of off-balance-sheet items ANNEX V Part A Repealed Directives, together with their successive amendments (referred to in Article 67) ANNEX V Part B Deadlines for implementation (referred to in Article 67) ANNEX VI Correlation table







TITLE I

DEFINITIONS AND SCOPE

Article 1

Definitions

For the purpose of this Directive:

▼M1 1. ‘credit institution’ shall mean: (a) an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account; or (b) an electronic money institution within the meaning of Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit and prudential supervision of the business of electronic money institutions ( 13 ). 1.‘credit institution’ shall mean: For the purposes of applying the supervision on a consolidated basis, shall be considered as a credit institution, a credit institution according to the first paragraph and any private or public undertaking which corresponds to the definition in the first paragraph and which has been authorised in a third country. For the purposes of applying the supervision and control of large exposures, shall be considered as a credit institution, a credit institution according to the first paragraph, including branches of a credit institution in third countries and any private or public undertaking, including its branches, which corresponds to the definition in the first paragraph and which has been authorised in a third country;

2. ‘authorisation’shall mean an instrument issued in any form by the authorities by which the right to carry on the business of a credit institution is granted;

3. ‘branch’shall mean a place of business which forms a legally dependent part of a credit institution and which carries out directly all or some of the transactions inherent in the business of credit institutions; any number of places of business set up in the same Member State by a credit institution with headquarters in another Member State shall be regarded as a single branch;

4. ‘competent authorities’shall mean the national authorities which are empowered by law or regulation to supervise credit institutions;

5. ‘financial institution’shall mean an undertaking other than a credit institution, the principal activity of which is to acquire holdings or to carry on one or more of the activities listed in points 2 to 12 of Annex I;

6. ‘home Member State’shall mean the Member State in which a credit institution has been authorised in accordance with Articles 4 to 11;

7. ‘host Member State’shall mean the Member State in which a credit institution has a branch or in which it provides services;

8. ‘control’shall mean the relationship between a parent undertaking and a subsidiary, as defined in Article 1 of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking;

▼M2

9. ‘participation for the purposes of supervision on a consolidated basis and for the purposes of points 15 and 16 of Article 34(2)’shall mean participation within the meaning of the first sentence of Article 17 of Directive 78/660/EEC, or the ownership, direct or indirect, of 20 % or more of the voting rights or capital of an undertaking;

▼B

10. ‘qualifiying holding’shall mean a direct or indirect holding in an undertaking which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the undertaking in which a holding subsists.

11. ‘initial capital’shall mean capital as defined in Article 34(2)(1) and (2);

12. ‘parent undertaking’shall mean a parent undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC. It shall, for the purposes of supervision on a consolidated basis and control of large exposures, mean a parent undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking which, in the opinion of the competent authorities, effectively exercises a dominant influence over another undertaking;

13. ‘subsidiary’shall mean a subsidiary undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC. It shall, for the purposes of supervision on a consolidated basis and control of large exposures, mean a subsidiary undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking over which, in the opinion of the competent authorities, a parent undertaking effectively exercises a dominant influence. All subsidiaries of subsidiary undertakings shall also be considered subsidiaries of the undertaking that is their original parent;

14. ‘Zone A’shall comprise all the Member States and all other countries which are full members of the Organisation for Economic Cooperation and Development (OECD) and those countries which have concluded special lending arrangements with the International Monetary Fund (IMF) associated with the Fund's general arrangements to borrow (GAB). Any country which reschedules its external sovereign debt is, however, precluded from Zone A for a period of five years;

15. ‘Zone B’shall comprise all countries not in Zone A;

16. ‘Zone A credit institutions’shall mean all credit institutions authorised in the Member States, in accordance with Article 4, including their branches in third countries, and all private and public undertakings covered by the definitions in point 1, first subparagraph and authorised in other Zone A countries, including their branches;

17. ‘Zone B credit institutions’shall mean all private and public undertakings authorised outside Zone A covered by the definition in point 1, first subparagraph, including their branches within the Community;

18. ‘non-bank sector’shall mean all borrowers other than credit institutions as defined in points 16 and 17, central governments and central banks, regional governments and local authorities, the European Communities, the European Investment Bank (EIB) and multilateral development banks as defined in point 19;

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19. ‘multilateral development banks’shall mean the International Bank for Reconstruction and Development, the International Finance Corporation, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the Council of Europe Resettlement Fund, the Nordic Investment Bank, the Caribbean Development Bank, the European Bank for Reconstruction and Development, the European Investment Fund, the Inter-American Investment Corporation and the Multilateral Investment Guarantee Agency;

▼B

20. ‘“full-risk”, “medium-risk”, “medium/low-risk” and “low-risk” off-balance-sheet items’shall mean the items described in Article 43(2) and listed in Annex II;

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21. ‘financial holding company’shall mean a financial institution, the subsidiary undertakings of which are either exclusively or mainly credit institutions or financial institutions, at least one of such subsidiaries being a credit institution, and which is not a mixed financial holding company within the meaning of Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate ( 14 );

22. ‘mixed-activity holding company’shall mean a parent undertaking, other than a financial holding company or a credit institution or a mixed financial holding company within the meaning of Directive 2002/87/EC, the subsidiaries of which include at least one credit institution;

▼B

23. ‘ancillary banking services undertaking’shall mean an undertaking the principal activity of which consists in owning or managing property, managing data-processing services, or any other similar activity which is ancillary to the principal activity of one or more credit institutions;

24. ‘exposures’ for the purpose of applying Articles 48, 49 and 50 shall mean the assets and off-balance-sheet items referred to in Article 43 and in Annexes II and IV thereto, without application of the weightings or degrees of risk there provided for; the risks referred to in Annex IV must be calculated in accordance with one of the methods set out in Annex III, without application of the weightings for counterparty risk; all elements entirely covered by own funds may, with the agreement of the competent authorities, be excluded from the definition of exposures provided that such own funds are not included in the calculation of the solvency ratio or of other monitoring ratios provided for in this Directive and in other Community acts; exposures shall not include: — in the case of foreign exchange transactions, exposures incurred in the ordinary course of settlement during the 48 hours following payment, or — in the case of transactions for the purchase or sale of securities, exposures incurred in the ordinary course of settlement during the five working days following payment or delivery of the securities, whichever is the earlier;

25. ‘group of connected clients’ shall mean: — two or more natural or legal persons who, unless it is shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other or others or — two or more natural or legal persons between whom there is no relationship of control as defined in the first indent but who are to be regarded as constituting a single risk because they are so interconnected that, if one of them were to experience financial problems, the other or all of the others would be likely to encounter repayment difficulties;

26. ‘close links’ shall mean a situation in which two or more natural or legal persons are linked by: (a) participation, which shall mean the ownership, direct or by way of control, of 20 % or more of the voting rights or capital of an undertaking, or (b) control, which shall mean the relationship between a parent undertaking and a subsidiary, in all the cases referred to in Article 1(1) and (2) of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking; any subsidiary undertaking of a subsidiary undertaking shall also be considered a subsidiary of the parent undertaking which is at the head of those undertakings. A situation in which two or more natural or legal persons are permanently linked to one and the same person by a control relationship shall also be regarded as constituting a close link between such persons.

27. ‘recognised exchanges’ shall mean exchanges recognised by the competent authorities which: (i) function regularly, (ii) have rules, issued or approved by the appropriate authorities of the home country of the exchange, which define the conditions for the operation of the exchange, the conditions of access to the exchange as well as the conditions that must be satisfied by a contract before it can effectively be dealt on the exchange, (iii) have a clearing mechanism that provides for contracts listed in Annex IV to be subject to daily margin requirements providing an appropriate protection in the opinion of the competent authorities.

Article 2

Scope

1. This Directive concerns the taking up and pursuit of the business of credit institutions. This Directive shall apply to all credit institutions.

2. Articles 25 and 52 to 56 shall also apply to financial holding companies and mixed-activity holding companies which have their head offices in the Community.

The institutions permanently excluded by paragraph 3, with the exception, however, of the Member States' central banks, shall be treated as financial institutions for the purposes of Articles 25 and 52 to 56.

3. This Directive shall not apply to:

— the central banks of Member States,

— post office giro institutions,

— in Belgium, the ‘Institut de Réescompte et de Garantie/Herdiscontering- en Waarborginstituut’,

— in Denmark, the ‘Dansk Eksportfinansieringsfond’, the ‘Danmarks Skibskreditfond’, and ‘Dansk Landbrugs Realkreditfond’,

— in Germany, the ‘Kreditanstalt für Wiederaufbau’, undertakings which are recognised under the ‘Wohnungsgemeinnützigkeitsgesetz’ as bodies of State housing policy and are not mainly engaged in banking transactions, and undertakings recognised under that law as non-profit housing undertakings,

— in Greece, the ‘Ελληνική Τράπεζα Βιομηχανικής Αναπτύξεως,’, (Elliniki Trapeza Viomichanikis Anaptyxeos), the ‘Ταμείο Παρακαταθηκών και Δανείων’ (Tamio Parakatathikon kai Danion), and the ‘Ταχυδρομικό Ταμιευτήριο’ (Tachidromiko Tamieftirio),

— in Spain, the ‘Instituto de Crédito Oficial’,

— in France, the ‘Caisse des dépôts et consignations’,

— in Ireland, credit unions and the friendly societies,

— in Italy, the ‘Cassa depositi e prestiti’,

— in the Netherlands, the ‘Netherlandse Investeringsbank voor Ontwikkelingslanden NV’, the ‘NV Noordelijke Ontwikkelingsmaatschappij’, the ‘NV Industriebank Limburgs Instituut voor Ontwikkeling en Financiering’ and the ‘Overijsselse Ontwikkelingsmaatschappij NV’,

— in Austria, undertakings recognised as housing associations in the public interest and the ‘Österreichische Kontrollbank AG’,

— in Portugal, ‘Caixas Económicas’ existing on 1 January 1986 with the exception of those incorporated as limited companies and of the ‘Caixa Económica Montepio Geral’,

— in Finland, the ‘Teollisen yhteistyön rahasto Oy/Fonden för industriellt samarbete AB’, and the ‘Kera Oy/Kera Ab’,

— in Sweden, the ‘Svenska Skeppshypotekskassan’,

— in the United Kingdom, the National Savings Bank, the Commonwealth Development Finance Company Ltd, the Agricultural Mortgage Corporation Ltd, the Scottish Agricultural Securities Corporation Ltd, the Crown Agents for overseas governments and administrations, credit unions and municipal banks,

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— in Latvia, the ‘krājaizdevu sabiedrības’, undertakings that are recognised under the ‘krājaizdevu sabiedrību likums’ as cooperative undertakings rendering financial services solely to their members,

— in Lithuania, the ‘kredito unijos’ other than the ‘Centrinė kredito unija’,

— in Hungary, the ‘Magyar Fejlesztési Bank Rt.’ and the ‘Magyar Export-Import Bank Rt.’,

— in Poland, the ‘Spółdzielcze Kasy Oszczędnościowo - Kreditowe’ and the ‘Bank Gospodarstwa Krajowego’.

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4. The Commission, pursuant to the procedure referred to in Article 60(2), shall decide on amendments to the list in paragraph 3.

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5. Credit institutions situated in the same Member State and permanently affiliated, on 15 December 1977, to a central body which supervises them and which is established in that same Member State, may be exempted from the requirements of Articles 6(1), 8 and 59 if, no later than 15 December 1979, national law provides that:

— the commitments of the central body and affiliated institutions are joint and several liabilities or the commitments of its affiliated institutions are entirely guaranteed by the central body,

— the solvency and liquidity of the central body and of all the affiliated institutions are monitored as a whole on the basis of consolidated accounts,

— the management of the central body is empowered to issue instructions to the management of the affiliated institutions.

Credit institutions operating locally which are affiliated, subsequent to 15 December 1977, to a central body within the meaning of the first subparagraph, may benefit from the conditions laid down therein if they constitute normal additions to the network belonging to that central body.

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In the case of credit institutions other than those which are set up in areas newly reclaimed from the sea or which have resulted from scission or mergers of existing institutions dependent on or answerable to the central body, the Commission, pursuant to the procedure referred to in Article 60(2), may lay down additional rules for the application of the second subparagraph including the repeal of exemptions provided for in the first subparagraph, where it is of the opinion that the affiliation of new institutions benefiting from the arrangements laid down in the second subparagraph might have an adverse effect on competition.

▼B

6. A credit institution which, as defined in the first subparagraph of paragraph 5, is affiliated to a central body in the same Member State may also be exempted from the provisions of Article 5, and also Articles 40 to 51, and 65 provided that, without prejudice to the application of those provisions to the central body, the whole as constituted by the central body together with its affiliated institutions is subject to the abovementioned provisions a consolidated basis.

In case of exemption, Articles 13, 18, 19, 20(1) to (6), 21 and 22 shall apply to the whole as constituted by the central body together with its affiliated institutions.

Article 3

Prohibition for undertakings other than credit institutions from carrying on the business of taking deposits or other repayable funds from the public

The Member States shall prohibit persons or undertakings that are not credit institutions from carrying on the business of taking deposits or other repayable funds from the public. This prohibition shall not apply to the taking of deposits or other funds repayable by a Member State or by a Member State's regional or local authorities or by public international bodies of which one or more Member States are members or to cases expressly covered by national or Community legislation, provided that those activities are subject to regulations and controls intended to protect depositors and investors and applicable to those cases.







TITLE II

REQUIREMENTS FOR ACCESS TO THE TAKING UP AND PURSUIT OF THE BUSINESS OF CREDIT INSTITUTIONS

▼M5

Article 4

Authorisation

Member States shall require credit institutions to obtain authorisation before commencing their activities. They shall lay down the requirements for such authorisation subject to Articles 5 to 9, and notify them to the Commission.

▼B

Article 5

Initial capital

1. Without prejudice to other general conditions laid down by national law, the competent authorities shall not grant authorisation when the credit institution does not possess separate own funds or in cases where initial capital is less than EUR 5 million.

Member States may decide that credit institutions which do not fulfil the requirement of separate own funds and which were in existence on 15 December 1979 may continue to carry on their business. They may exempt such credit institutions from complying with the requirement contained in the first subparagraph of Article 6(1).

2. The Member States shall, however, have the option of granting authorisation to particular categories of credit institutions the initial capital of which is less than that prescribed in paragraph 1. In such cases:

(a) the initial capital shall not be less than EUR 1 million,

(b) the Member States concerned must notify the Commission of their reasons for making use of the option provided for in this paragraph,

(c) when the list referred to in Article 11 is published, the name of each credit institution that does not have the minimum capital prescribed in paragraph 1 shall be annotated to that effect.

3. A credit institution's own funds may not fall below the amount of initial capital required by paragraphs 1 and 2 at the time of its authorisation.

4. The Member States may decide that credit institutions already in existence on 1 January 1993, the own funds of which do not attain the levels prescribed for initial capital in paragraphs 1 and 2, may continue to carry on their activities. In that event, their own funds may not fall below the highest level reached with effect from 22 December 1989.

5. If control of a credit institution falling within the category referred to in paragraph 4 is taken by a natural or legal person other than the person who controlled the institution previously, the own funds of that institution must attain at least the level prescribed for initial capital in paragraphs 1 and 2.

6. In certain specific circumstances and with the consent of the competent authorities, where there is a merger of two or more credit institutions falling within the category referred to in paragraph 4, the own funds of the institution resulting from the merger may not fall below the total own funds of the merged institutions at the time of the merger, as long as the appropriate levels pursuant to paragraphs 1 and 2 have not been attained.

7. If, in the cases referred to in paragraphs 3, 4 and 6, the own funds should be reduced, the competent authorities may, where the circumstances justify it, allow an institution a limited period in which to rectify its situation or cease its activities.

Article 6

Management body and place of the head office of credit institutions

1. The competent authorities shall grant an authorisation to the credit institution only when there are at least two persons who effectively direct the business of the credit institution.

Moreover, the authorities concerned shall not grant authorisation if these persons are not of sufficiently good repute or lack sufficient experience to perform such duties.

2. Each Member State shall require that:

— any credit institution which is a legal person and which, under its national law, has a registered office have its head office in the same Member State as its registered office,

— any other credit institution have its head office in the Member State which issued its authorisation and in which it actually carries on its business.

Article 7

Shareholders and members

1. The competent authorities shall not grant authorisation for the taking-up of the business of credit institutions before they have been informed of the identities of the shareholders or members, whether direct or indirect, natural or legal persons, that have qualifying holdings, and of the amounts of those holdings.

For the purpose of the definition of qualifying holding in the context of this Article, the voting rights referred to in Article 7 of Council Directive 88/627/EEC ( 15 ) shall be taken into consideration.

2. The competent authorities shall refuse authorisation if, taking into account the need to ensure the sound and prudent management of a credit institution, they are not satisfied as to the suitability of the abovementioned shareholders or members.

3. Where close links exist between the credit institution and other natural or legal persons, the competent authorities shall grant authorisation only if those links do not prevent the effective exercise of their supervisory functions.

The competent authorities shall also refuse authorisation if the laws, regulations or administrative provisions of a non-member country governing one or more natural or legal persons with which the credit institution has close links, or difficulties involved in their enforcement, prevent the effective exercise of their supervisory functions.

The competent authorities shall require credit institutions to provide them with the information they require to monitor compliance with the conditions referred to in this paragraph on a continuous basis.

Article 8

Programme of operations and structural organisation

Member States shall require applications for authorisation to be accompanied by a programme of operations setting out, inter alia, the types of business envisaged and the structural organisation of the institution.

Article 9

Economic needs

Member States may not require the application for authorisation to be examined in terms of the economic needs of the market.

Article 10

Authorisation refusal

Reasons shall be given whenever an authorisation is refused and the applicant shall be notified thereof within six months of receipt of the application or, should the latter be incomplete, within six months of the applicant's sending the information required for the decision. A decision shall, in any case, be taken within 12 months of the receipt of the application.

Article 11

Notification of the authorisation to the Commission

Every authorisation shall be notified to the Commission. Each credit institution shall be entered in a list which the Commission shall publish in the Official Journal of the European Communities and shall keep up to date.

Article 12

Prior consultation with the competent authorities of other Member States

There must be prior consultation with the competent authorities of the other Member State involved on the authorisation of a credit institution which is:

— a subsidiary of a credit institution authorised in another Member State, or

— a subsidiary of the parent undertaking of a credit institution authorised in another Member State, or

— controlled by the same persons, whether natural or legal, as control a credit institution authorised in another Member State.

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The competent authority of a Member State involved, responsible for the supervision of insurance undertakings or investment firms, shall be consulted prior to the granting of an authorisation to a credit institution which is:

(a) a subsidiary of an insurance undertaking or investment firm authorised in the Community; or

(b) a subsidiary of the parent undertaking of an insurance undertaking or investment firm authorised in the Community; or

(c) controlled by the same person, whether natural or legal, who controls an insurance undertaking or investment firm authorised in the Community.

The relevant competent authorities referred to in the first and second paragraphs shall in particular consult each other when assessing the suitability of the shareholders and the reputation and experience of directors involved in the management of another entity of the same group. They shall inform each other of any information regarding the suitability of shareholders and the reputation and experience of directors which is of relevance to the other competent authorities involved for the granting of an authorisation as well as for the ongoing assessment of compliance with operating conditions.

▼B

Article 13

Branches of credit institutions authorised in another Member State

Host Member States may not require authorisation or endowment capital for branches of credit institutions authorised in other Member States. The establishment and supervision of such branches shall be effected as prescribed in Articles 17, 20(l) to (6) and Articles 22 and 26.

Article 14

Withdrawal of authorisation

1. The competent authorities may withdraw the authorisation issued to a credit institution only where such an institution:

(a) does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased to engage in business for more than six months, if the Member State concerned has made no provision for the authorisation to lapse in such cases;

(b) has obtained the authorisation through false statements or any other irregular means;

(c) no longer fulfils the conditions under which authorisation was granted;

(d) no longer possesses sufficient own funds or can no longer be relied on to fulfil its obligations towards its creditors, and in particular no longer provides security for the assets entrusted to it;

(e) falls within one of the other cases where national law provides for withdrawal of authorisation.

2. Reasons must be given for any withdrawal of authorisation and those concerned informed thereof; such withdrawal shall be notified to the Commission.

Article 15

Name

For the purpose of exercising their activities, credit institutions may, notwithstanding any provisions concerning the use of the words ‘bank’, ‘savings bank’ or other banking names which may exist in the host Member State, use throughout the territory of the Community the same name as they use in the Member State in which their head office is situated. In the event of there being any danger of confusion, the host Member State may, for the purposes of clarification, require that the name be accompanied by certain explanatory particulars.

Article 16

Qualifiying holding in a credit institution

1. The Member States shall require any natural or legal person who proposes to hold, directly or indirectly a qualifying holding in a credit institution first to inform the competent authorities, telling them of the size of the intended holding. Such a person must likewise inform the competent authorities if he proposes to increase his qualifying holding so that the proportion of the voting rights or of the capital held by him would reach or exceed 20 %, 33 % or 50 % or so that the credit institution would become his subsidiary.

Without prejudice to the provisions of paragraph 2, the competent authorities shall have a maximum of three months from the date of the notification provided for in the first subparagraph to oppose such a plan if, in view of the need to ensure sound and prudent management of the credit institution, they are not satisfied as to the suitability of the person referred to in the first subparagraph. If they do not oppose the plan referred to in the first subparagraph, they may fix a maximum period for its implementation.

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2. If the acquirer of the holdings referred to in paragraph 1 is a credit institution, insurance undertaking or investment firm authorised in another Member State or the parent undertaking of a credit institution, insurance undertaking or investment firm authorised in another Member State or a natural or legal person controlling a credit institution, insurance undertaking or investment firm authorised in another Member State, and if, as a result of that acquisition, the institution in which the acquirer proposes to hold a holding would become a subsidiary or subject to the control of the acquirer, the assessment of the acquisition must be subject to the prior consultation referred to in Article 12.

▼B

3. The Member States shall require any natural or legal person who proposes to dispose, directly or indirectly, of a qualifying holding in a credit institution first to inform the competent authorities, telling them of the size of his intended holding. Such a person must likewise inform the competent authorities if he proposes to reduce his qualifying holding so that the proportion of the voting rights or of the capital held by him would fall below 20 %, 33 % or 50 % or so that the credit institution would cease to be his subsidiary.

4. On becoming aware of them, credit institutions shall inform the competent authorities of any acquisitions or disposals of holdings in their capital that cause holdings to exceed or fall below one of the thresholds referred to in paragraphs 1 and 3.

They shall also, at least once a year, inform them of the names of shareholders and members possessing qualifying holdings and the sizes of such holdings as shown, for example, by the information received at the annual general meetings of shareholders and members or as a result of compliance with the regulations relating to companies listed on stock exchanges.

5. The Member States shall require that, where the influence exercised by the persons referred to in paragraph 1 is likely to operate to the detriment of the prudent and sound management of the institution, the competent authorities shall take appropriate measures to put an end to that situation. Such measures may consist for example in injunctions, sanctions against directors and managers, or the suspension of the exercise of the voting rights attaching to the shares held by the shareholders or members in question.

Similar measures shall apply to natural or legal persons failing to comply with the obligation to provide prior information, as laid down in paragraph 1. If a holding is acquired despite the opposition of the competent authorities, the Member States shall, regardless of any other sanctions to be adopted, provide either for exercise of the corresponding voting rights to be suspended, or for the nullity of votes cast or for the possibility of their annulment.

6. For the purposes of the definition of qualifying holding and other levels of holding set out in this Article, the voting rights referred to in Article 7 of Directive 88/627/EEC shall be taken into consideration.

Article 17

Procedures and internal control mechanisms

Home Member State competent authorities shall require that every credit institution have sound administrative and accounting procedures and adequate internal control mechanisms.







TITLE III

PROVISIONS CONCERNING THE FREEDOM OF ESTABLISHMENT AND THE FREEDOM TO PROVIDE SERVICES

Article 18

Credit institutions

The Member States shall provide that the activities listed in Annex I may be carried on within their territories, in accordance with Articles 20(1) to (6), 21(1) and (2), and 22, either by the establishment of a branch or by way of the provision of services, by any credit institution authorised and supervised by the competent authorities of another Member State, provided that such activities are covered by the authorisation.

Article 19

Financial institutions

The Member States shall also provide that the activities listed in Annex I may be carried on within their territories, in accordance with Articles 20(1) to (6), 21(1) and (2), and 22, either by the establishment of a branch or by way of the provision of services, by any financial institution from another Member State, whether a subsidiary of a credit institution or the jointly-owned subsidiary of two or more credit institutions, the memorandum and articles of association of which permit the carrying on of those activities and which fulfils each of the following conditions:

— the parent undertaking or undertakings must be authorised as credit institutions in the Member State by the law of which the subsidiary is governed,

— the activities in question must actually be carried on within the territory of the same Member State,

— the parent undertaking or undertakings must hold 90 % or more of the voting rights attaching to shares in the capital of the subsidiary.

— the parent undertaking or undertakings must satisfy the competent authorities regarding the prudent management of the subsidiary and must have declared, with the consent of the relevant home Member State competent authorities, that they jointly and severally guarantee the commitments entered into by the subsidiary,

— the subsidiary must be effectively included, for the activities in question in particular, in the consolidated supervision of the parent undertaking, or of each of the parent undertakings, in accordance with Articles 52 to 56, in particular for the calculation of the solvency ratio, for the control of large exposures and for purposes of the limitation of holdings provided for in Article 51.

Compliance with these conditions must be verified by the competent authorities of the home Member State and the latter must supply the subsidiary with a certificate of compliance which must form part of the notification referred to in Articles 20(1) to (6), and 21(1) and (2).

The competent authorities of the home Member State shall ensure the supervision of the subsidiary in accordance with Articles 5(3), 16, 17, 26, 28, 29, 30, and 32.

The provisions mentioned in this Article shall apply mutatis mutandis to subsidiaries, subject to the necessary modifications. In particular, the words ‘credit institution’ should be read as ‘financial institution fulfilling the conditions laid down in Article 19’ and the word ‘authorisation’ as ‘memorandum and articles of association’.

The second subparagraph of Article 20(3) shall read:

‘The home Member State competent authorities shall also communicate the amount of own funds of the subsidiary financial institution and the consolidated solvency ratio of the credit institution which is its parent undertaking’

.

If a financial institution eligible under this Article should cease to fulfil any of the conditions imposed, the home Member State shall notify the competent authorities of the host Member State and the activities carried on by that institution in the host Member State become subject to the legislation of the host Member State.

Article 20

Exercise of the right of establishment

1. A credit institution wishing to establish a branch within the territory of another Member State shall notify the competent authorities of its Member State.

2. The Member State shall require every credit institution wishing to establish a branch in another Member State to provide the following information when effecting the notification referred to in paragraph 1:

(a) the Member State within the territory of which it plans to establish a branch;

(b) a programme of operations setting out, inter alia, the types of business envisaged and the structural organisation of the branch;

(c) the address in the host Member State from which documents may be obtained;

(d) the names of those responsible for the management of the branch.

3. Unless the competent authorities of the home Member State have reason to doubt the adequacy of the administrative structure or the financial situation of the credit institution, taking into account the activities envisaged, they shall within three months of receipt of the information referred to in paragraph 2 communicate that information to the competent authorities of the host Member State and shall inform the institution accordingly.

The home Member State competent authorities shall also communicate the amount of own funds and the solvency ratio of the credit institution.

Where the competent authorities of the home Member State refuse to communicate the information referred to in paragraph 2 to the competent authorities of the host Member State, they shall give reasons for their refusal to the institution concerned within three months of receipt of all the information. That refusal or failure to reply shall be subject to a right to apply to the courts in the home Member State.

4. Before the branch of a credit institution commences its activities the competent authorities of the host Member State shall, within two months of receiving the information mentioned in paragraph 3, prepare for the supervision of the credit institution in accordance with Article 22 and if necessary indicate the conditions under which, in the interest of the general good, those activities must be carried on in the host Member State.

5. On receipt of a communication from the competent authorities of the host Member State, or in the event of the expiry of the period provided for in paragraph 4 without receipt of any communication from the latter, the branch may be established and commence its activities.

6. In the event of a change in any of the particulars communicated pursuant to paragraph 2(b), (c) or (d), a credit institution shall give written notice of the change in question to the competent authorities of the home and host Member States at least one month before making the change so as to enable the competent authorities of the home Member State to take a decision pursuant to paragraph 3 and the competent authorities of the host Member State to take a decision on the change pursuant to paragraph 4.

7. Branches which have commenced their activities, in accordance with the provisions in force in their host Member States, before 1 January 1993, shall be presumed to have been subject to the procedure laid down in paragraphs 1 to 5. They shall be governed, from the abovementioned date, by paragraph 6, and by Articles 18, 19, 22 and 29.

Article 21

Exercise of the freedom to provide services

1. Any credit institution wishing to exercise the freedom to provide services by carrying on its activities within the territory of another Member State for the first time shall notify the competent authorities of the home Member State, of the activities on the list in Annex I which it intends to carry on.

2. The competent authorities of the home Member State shall, within one month of receipt of the notification mentioned in paragraph 1, send that notification to the competent authorities of the host Member State.

3. This Article shall not affect rights acquired by credit institutions providing services before 1 January 1993.

Article 22

Power of the competent authorities of the host Member State

1. Host Member States may, for statistical purposes, require that all credit institutions having branches within their territories shall report periodically on their activities in those host Member States to the competent authorities of those host Member States.

In discharging the responsibilities imposed on them in Article 27, host Member States may require that branches of credit institutions from other Member States provide the same information as they require from national credit institutions for that purpose.

2. Where the competent authorities of a host Member State ascertain than an institution having a branch or providing services within its territory is not complying with the legal provisions adopted in that State pursuant to the provisions of this Directive involving powers of the host Member State's competent authorities, those authorities shall require the institution concerned to put an end to that irregular situation.

3. If the institution concerned fails to take the necessary steps, the competent authorities of the host Member State shall inform the competent authorities of the home Member State accordingly. The competent authorities of the home Member State shall, at the earliest opportunity, take all appropriate measures to ensure that the institution concerned puts an end to that irregular situation. The nature of those measures shall be communicated to the competent authorities of the host Member State.

4. If, despite the measures taken by the home Member State or because such measures prove inadequate or are not available in the Member State in question, the institution persists in violating the legal rules referred to in paragraph 2 in force in the host Member State, the latter State may, after informing the competent authorities of the home Member State, take appropriate measures to prevent or to punish further irregularities and, in so far as is necessary, to prevent that institution from initiating further transactions within its territory. The Member States shall ensure that within their territories it is possible to serve the legal documents necessary for these measures on credit institutions.

5. The provisions of paragraph 1 to 4 shall not affect the power of host Member States to take appropriate measures to prevent or to punish irregularities committed within their territories which are contrary to the legal rules they have adopted in the interest of the general good. This shall include the possibility of preventing offending institutions from initiating any further transactions within their territories.

6. Any measure adopted pursuant to paragraph 3, 4 and 5 involving penalties or restrictions on the exercise of the freedom to provide services must be properly justified and communicated to the institution concerned. Every such measure shall be subject to a right of appeal to the courts in the Member State the authorities of which adopted it.

7. Before following the procedure provided for in paragraph 2, 3 and 4, the competent authorities of the host Member State may, in emergencies, take any precautionary measures necessary to protect the interests of depositors, investors and others to whom services are provided. The Commission and the competent authorities of the other Member States concerned must be informed of such measures at the earliest opportunity.

The Commission may, after consulting the competent authorities of the Member States concerned, decide that the Member State in question must amend or abolish those measures.

8. Host Member States may exercise the powers conferred on them under this Directive by taking appropriate measures to prevent or to punish irregularities committed within their territories. This shall include the possibility of preventing institutions from initiating further transactions within their territories.

9. In the event of the withdrawal of authorisation the competent authorities of the host Member State shall be informed and shall take appropriate measures to prevent the institution concerned from initiating further transactions within its territory and to safeguard the interests of depositors. ►M5 ————— ◄

10. The Member States shall inform the Commission of the number and type of cases in which there has been a refusal pursuant to Article 20(1) to (6) or in which measures have been taken in accordance with paragraph 4 of this Article. ►M5 ————— ◄

11. Nothing in this Article shall prevent credit institutions with head offices in other Member States from advertising their services through all available means of communication in the host Member State, subject to any rules governing the form and the content of such advertising adopted in the interest of the general good.







TITLE IV

RELATIONS WITH THIRD COUNTRIES

Article 23

Notification of the subsidiaries of third countries' undertakings and conditions of access to the markets of these countries

▼M5

1. The competent authorities of the Member States shall inform the Commission and the competent authorities of the other Member States:

(a) of any authorisation of a direct or indirect subsidiary one or more of whose parent undertakings are governed by the laws of a third country;

(b) whenever such a parent undertaking acquires a holding in a Community credit institution such that the latter would become its subsidiary. When authorisation is granted to the direct or indirect subsidiary of one or more parent undertakings governed by the law of third countries, the structure of the group shall be specified in the notification which the competent authorities shall address to the Commission in accordance with Article 11.

▼B

2. The Member States shall inform the Commission of any general difficulties encountered by their credit institutions in establishing themselves or carrying on banking activities in a third country.

3. The Commission shall periodically draw up a report examining the treatment accorded to Community credit institutions in third countries, in the terms referred to in paragraphs 4 and 5, as regards establishment and the carrying-on of banking activities, and the acquisition of holdings in third-country credit institutions. The Commission shall submit those reports to the Council, together with any appropriate proposals.

4. Whenever it appears to the Commission, either on the basis of the reports referred to in paragraph 3 or on the basis of other information, that a third country is not granting Community credit institutions effective market access comparable to that granted by the Community to credit institutions from that third country, the Commission may submit proposals to the Council for the appropriate mandate for negotiation with a view to obtaining comparable competitive opportunities for Community credit institutions. The Council shall decide by a qualified majority.

5. Whenever it appears to the Commission, either on the basis of the reports referred to in paragraph 3 or on the basis of other information that Community credit institutions in a third country do not receive national treatment offering the same competitive opportunities as are available to domestic credit institutions and the conditions of effective market access are not fulfilled, the Commission may initiate negotiations in order to remedy the situation.

In the circumstances described in the first subparagraph, it may also be decided at any time, and in addition to initiating negotiations, in accordance with the procedure laid down in Article 60(2), that the competent authorities of the Member States must limit or suspend their decisions regarding requests pending at the moment of the decision or future requests for authorisations and the acquisition of holdings by direct or indirect parent undertakings governed by the laws of the third country in question. The duration of the measures referred to may not exceed three months.

Before the end of that three-month period, and in the light of the results of the negotiations, the Council may, acting on a proposal from the Commission, decide by a qualified majority whether the measures shall be continued.

Such limitations or suspension may not apply to the setting up of subsidiaries by credit institutions or their subsidiaries duly authorised in the Community, or to the acquisition of holdings in Community credit institutions by such institutions or subsidiaries.

6. Whenever it appears to the Commission that one of the situations described in paragraphs 4 and 5 obtains, the Member States shall inform it at its request:

(a) of any request for the authorisation of a direct or indirect subsidiary one or more parent undertakings of which are governed by the laws of the third country in question;

(b) whenever they are informed in accordance with Article 16 that such an undertaking proposes to acquire a holding in a Community credit institution such that the latter would become its subsidiary.

This obligation to provide information shall lapse whenever an agreement is reached with the third country referred to in paragraph 4 or 5 or when the measures referred to in the second and third subparagraphs of paragraph 5 cease to apply.

7. Measures taken pursuant to this Article comply with the Community's obligations under any international agreements, bilateral or multilateral, governing the taking-up and pursuit of the business of credit institutions.

Article 24

Branches of credit institutions having their head offices outside the Community

1. Member States shall not apply to branches of credit institutions having their head office outside the Community, when commencing or carrying on their business, provisions which result in more favourable treatment than that accorded to branches of credit institutions having their head office in the Community.

2. The competent authorities shall notify the Commission and the ►M5 European Banking Committee ◄ of all authorisations for branches granted to credit institutions having their head office outside the Community.

3. Without prejudice to paragraph 1, the Community may, through agreements concluded in accordance with the Treaty with one or more third countries, agree to apply provisions which, on the basis of the principle of reciprocity, accord to branches of a credit institution having its head office outside the Community identical treatment throughout the territory of the Community.

Article 25

Cooperation with third countries' competent authorities regarding supervision on a consolidated basis

1. The Commission may submit proposals to the Council, either at the request of a Member State or on its own initiative, for the negotiation of agreements with one or more third countries regarding the means of exercising supervision on a consolidated basis over:

— credit institutions the parent undertakings of which have their head offices situated in a third country, and

— credit institutions situated in third countries the parent undertakings of which, whether credit institutions or financial holding companies, have their head offices in the Community.

2. The agreements referred to in paragraph 1 shall in particular seek to ensure both:

— that the competent authorities of the Member States are able to obtain the information necessary for the supervision, on the basis of their consolidated financial situations, of credit institutions or financial holding companies situated in the Community and which have as subsidiaries credit institutions or financial institutions situated outside the Community, or holding participation in such institutions,

— that the competent authorities of third countries are able to obtain the information necessary for the supervision of parent undertakings the head offices of which are situated within their territories and which have as subsidiaries credit institutions or financial institutions situated in one or more Member States or holding participation in such institutions.

▼M5

3. Without prejudice to Article 300(1) and (2) of the Treaty, the Commission shall, with the assistance of the European Banking Committee, examine the outcome of the negotiations referred to in paragraph 1 and the resulting situation.

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TITLE V

PRINCIPLES AND TECHNICAL INSTRUMENTS FOR PRUDENTIAL SUPERVISION







CHAPTER 1

PRINCIPLES OF PRUDENTIAL SUPERVISION

Article 26

Competence of control of the home Member State

1. The prudential supervision of a credit institution, including that of the activities it carries on accordance with Articles 18 and 19, shall be the responsibility of the competent authorities of the home Member State, without prejudice to those provisions of this Directive which give responsibility to the authorities of the host Member State.

2. Paragraph 1 shall not prevent supervision on a consolidated basis pursuant to this Directive.

Article 27

Competence of the host Member State

Host Member States shall retain responsibility in cooperation with the competent authorities of the home Member State for the supervision of the liquidity of the branches of credit institutions pending further coordination. Without prejudice to the measures necessary for the reinforcement of the European Monetary System, host Member States shall retain complete responsibility for the measures resulting from the implementation of their monetary policies. Such measures may not provide for discriminatory or restrictive treatment based on the fact that a credit institution is authorised in another Member State.

Article 28

Collaboration concerning supervision

The competent authorities of the Member States concerned shall collaborate closely in order to supervise the activities of credit institutions operating, in particular by having established branches there, in one or more Member States other than that in which their head offices are situated. They shall supply one another with all information concerning the management and ownership of such credit institutions that is likely to facilitate their supervision and the examination of the conditions for their authorisation, and all information likely to facilitate the monitoring of such institutions, in particular with regard to liquidity, solvency, deposit guarantees, the limiting of large exposures, administrative and accounting procedures and internal control mechanisms.

Article 29

On-the-spot verification of branches established in another Member State

1. Host Member States shall provide that, where a credit institution authorised in another Member State carries on its activities through a branch, the competent authorities of the home Member State may, after having first informed the competent authorities of the host Member State, carry out themselves or through the intermediary of persons they appoint for that purpose on-the-spot verification of the information referred to in Article 28.

2. The competent authorities of the home Member State may also, for purposes of the verification of branches, have recourse to one of the other procedures laid down in Article 56(7).

3. This Article shall not affect the right of the competent authorities of the host Member State to carry out, in the discharge of their responsibilities under this Directive, on-the-spot verifications of branches established within their territory.

Article 30

Exchange of information and professional secrecy

1. The Member States shall provide that all persons working or who have worked for the competent authorities, as well as auditors or experts acting on behalf of the competent authorities, shall be bound by the obligation of professional secrecy. This means that no confidential information which they may receive in the course of their duties may be divulged to any person or authority whatsoever, except in summary or collective form, such that individual institutions cannot be identified, without prejudice to cases covered by criminal law.

Nevertheless, where a credit institution has been declared bankrupt or is being compulsorily wound up, confidential information which does not concern third parties involved in attempts to rescue that credit institution may be divulged in civil or commercial proceedings.

2. Paragraph 1 shall not prevent the competent authorities of the various Member States from exchanging information in accordance with this Directive and with other Directives applicable to credit institutions. That information shall be subject to the conditions of professional secrecy indicated in paragraph 1.

3. Member States may conclude cooperation agreements, providing for exchanges of information, with the competent authorities of third countries or with authorities or bodies of third countries as defined in paragraphs 5 and 6 only if the information disclosed is subject to guarantees of professional secrecy at least equivalent to those referred to in this Article. Such exchange of information must be for the purpose of performing the supervisory task of the authorities or bodies mentioned.

Where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement.

4. Competent authorities receiving confidential information under paragraphs 1 or 2 may use it only in the course of their duties:

— to check that the conditions governing the taking-up of the business of credit institutions are met and to facilitate monitoring, on a non-consolidated or consolidated basis, of the conduct of such business, especially with regard to the monitoring of liquidity, solvency, large exposures, and administrative and accounting procedures and internal control mechanisms, or

— to impose sanctions, or

— in an administrative appeal against a decision of the competent authority, or

— in court proceedings initiated pursuant to Article 33 or to special provisions provided for in this in other Directives adopted in the field of credit institutions.

5. Paragraphs 1 and 4 shall not preclude the exchange of information within a Member State, where there are two or more competent authorities in the same Member State, or between Member States, between competent authorities and:

— authorities entrusted with the public duty of supervising other financial organisations and insurance companies and the authorities responsible for the supervision of financial markets,

— bodies involved in the liquidation and bankruptcy of credit institutions and in other similar procedures,

— persons responsible for carrying out statutory audits of the accounts of credit institutions and other financial institutions,

in the discharge of their supervisory functions, and the disclosure to bodies which administer deposit-guarantee schemes of information necessary to the exercise of their functions. The information received shall be subject to the conditions of professional secrecy indicated in paragraph 1.

6. Notwithstanding paragraphs 1 to 4, Member States may authorise exchanges of information between, the competent authorities and:

— the authorities responsible for overseeing the bodies, involved in the liquidation and bankruptcy of credit institutions and other similar procedures, or

— the authorities responsible for overseeing persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment firms and other financial institutions.

Member State