COMMISSION OF THE EUROPEAN COMMUNITIES 
G0M(93) 391 final 
Brussels, 1 September 1993 
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under Article 1(4) of Directive 89/647/EEC, 
on the exemptions granted by Member States to certain 
specialized credit institutions 
- 1 -
Directive 89/647/EEC of 18 December 1989 on a solvency ratio for credit 
institutions gives Member States the option of excluding certain 
institutions from the Directive's scope. 
The last sentence of Article 1(4) of the Directive requires the Commission 
to submit to the Council a report on such exemptions in order to ensure that 
they do not result in distortions of competition.1 
Exemptions may be granted under the following conditions: 
- they must be exceptional; 
- they are to be applied "pending further harmonization of the prudential 
rules relating to credit, interest-rate and market risks"; 
they are restricted to credit institutions "specializing in the 
inter-bank and public-debt markets and fulfilling, together with the 
central bank, the institutional function of banking-system liquidity 
regulator"; 
- the sum of the asset and off-balance-sheet items of such credit 
institutions included in the 50% and 100% weightings calculated in 
accordance with Article 6 must not normally exceed 10% of total assets 
and off-balance-sheet items and must not in any event exceed 15% before 
application of the weightings; 
the main activity of such credit institutions must consist of acting as 
intermediary between the central banks of their Member States and the 
banking system; 
the competent authorities must apply proper systems of supervision and 
control of the credit, interest-rate and market risks of such 
inst i tut ions. 
1 This report is also being transmitted to Parliament and the Economic and 
Social Committee. 
- 2 -
On 1 May 1993, following a request for information on exemptions which the 
Commission made by letter dated 22 January 1993 to the members of the 
Banking Advisory Committee, the position was as follows: 
- None of the Member States, with the exception of the United Kingdom, had 
granted any exemptions under Article 1(4). Greece nevertheless points 
out that "some institutions are permanently exempt from Directive 
89/647/EEC on the basis of Directive 86/524/EEC, which amended Directive 
77/780/EEC"; 
— The United Kingdom has granted exemptions to discount houses. It states 
that "The specialized role of the discount houses within the UK financial 
system and the generally limited range of activities undertaken by these 
institutions means that the impact of this exemption on competition is 
negligible. The discount houses are subject to prudential supervision 
by the Bank of England, and as institutions which are subject primarily 
to market risk, will have to meet the requirements of the Capital 
Adequacy Directive when it has been implemented in the UK. The Bank is 
already considering the implementation of the CAD." 
It is clear that the exemption mechanism provided for in Article 1(4) of 
Directive 89/647/EEC has been used in only one country. There is nothing 
in the replies from the Member States to indicate that its operation has 
caused any distortions of competition. The Commission therefore considers 
that there is no need to propose any measures in this respect. 
The Council is asked to take note of this report. 
1 -. 
ISSN 0254-1475 
COM(93) 391 final 
DOCUMENTS 
EN io 
Catalogue number : CB-CO-93-422-EN-C 
ISBN 92-77-58497-1 
Office for Official Publications of the European Communities 
L-2985 Luxembourg