No C 318/42 Official Journal of the European Communities 12. 12. 88 
Opinion on the proposal for a Second Council Directive on the coordination of laws, 
regulations and administrative provisions relating to the business of credit institutions and 
amending Directive 77/780/EEC (l) 
(88/C 318/15) 
On 7 March 1988 the Council decided to consult the Economic and Social Committee 
under Article 57 of the Treaty establishing the European Economic Community on the 
abovementioned proposal. 
The section for industry, commerce, crafts and services, which was responsible for preparing 
the Committee's work on the subject, adopted its Opinion on 7 September 1988. The 
rapporteur was Mr Pardon. 
At its 258th plenary session (meeting of 29 September 1988) the Economic and Social 
Committee adopted the following Opinion by 105 votes to 10, with 3 abstentions. 
1. General comments 
1.1. Purpose and basis of the proposal for a Directive 
The aim of the proposed Directive, which is based on 
Article 57 (2) of the Treaty, is to make it easier for 
credit institutions to exercise the right of establishment 
and the right to provide services freely. It seeks to 
harmonize, where necessary, the laws, regulations and 
administrative provisions in force in the Member States 
so as to ensure the safety of deposits, the protection of 
savings and, more generally, the sound operation of 
credit institutions in the general interest. 
1.2. The need for consistent and complete protection 
of savings 
The principles of the single licence and of home country 
supervision are to be implemented both in respect of 
business conducted via a branch established in another 
Member State and where services are provided without 
the establishment of a branch. The rules to protect 
savings must therefore be consistent and complete 
throughout the Community and in each Member State 
individually. 
1.3. Aspects of the protection of savings 
Two aspects can be distinguished: 
a) the supervision of credit institutions authorized to 
take deposits from the public in the form of repay­
able funds and to use such funds for their own 
account to make loans and investments and engage 
in other types of banking transaction; 
b) supervision of the use of the public's savings by 
any economic operator in any other form including 
securities. 1.4. The supervision of credit institutions, the subject 
of te proposal for a Directive 
1.4.1. Directive 77/780/CEE and the current pro­
posal for a Directive deal exclusively with the continu­
ous supervision of credit institutions in all the Member 
States, the aim being to promote proper management 
of these institutions and prevent as far as possible any 
failure or loss of confidence. 
1.4.2. Mutual recognition of licences and supervisory 
systems, allowing a single licence valid throughout the 
Community to be granted, and application of the prin­
ciple of home country control will require, simul­
taneously with implementation of the second Directive, 
the implementation of: 
— a specific Community law on own funds, i.e. the 
proposal for a Directive on the own funds of credit 
institutions, 
— a specific Community law on solvency ratios, i.e. 
the proposal for a Directive on the solvency ratios 
of credit institutions, 
— a specific Community law on controlling large 
exposures, i.e. the Commission recommendation of 
22 December 1986 (87/62/EEC, OJ No L 33, p. 10), 
— a specific Community law on deposit guarantees, i.e. 
the Commission recommendation of 22 December 
1986 (87/63/EEC, OJ No L 33, p. 16). 
If these last two recommendations are not applied by 
the Member States, we think they will have to be 
replaced by Directives. 
The Commission feels that mutual recognition does not 
require prior harmonization of the conditions relating 
to the reorganization and winding-up of credit insti­
tutions. The matter will however be pursued (fourth 
recital). 
(') OJ No C 84, 31.3. 1988, p. 1. As a matter of urgency, the Council should adopt 
the Directive concerning freedom of establishment and 
12. 12. 88 Official Journal of the European Communities No C 318/43 
freedom to provide services in the field of mortgage 
credit. 
1.4.3. The Commission maintains that harmoniz­
ation of these various matters is enough to ensure 
application of home country control. 
This harmonization is necessary and must be 
accomplished within the planned timescale. 
1.4.4. Supervising the financial position of credit 
institutions must cover everything to do with their 
liquidity, solvency and profitability, so as to ensure that 
creditors are protected. 
Approval and supervision solely by the appropriate 
authority in the home country means that there must 
be close collaboration between the authorities in each 
Member State. These must keep each other informed, 
cooperate with each other, especially when defining 
standards for supervision, coordinate their actions and 
try and reach some degree of agreement on the most 
appropriate techniques to use to ensure the level of 
safety which is essential. 
1.5. Action needed in connection with securities 
The protection of savings must constitute a coherent 
package. We call upon the Commission to see that 
this is so, so that there are no gaps in the system of 
protection. 
The Council should, as a matter of urgency, adopt the 
Directive concerning provision of investment services 
to the public. Particular care must be taken to see 
that any provisions which overlap both Directives are 
consistent and relevant in each case. 
Operators not licensed and supervised must not be 
allowed to draw on the public's savings. If existing legal 
instruments prove inadequate, the Commission should 
formulate proposals to guarantee complete protection 
of the public's savings. 
1.6. Basic principles to be respected by the proposal 
for a Directive 
The present proposal for a Directive should uphold and 
promote certain basic principles, e.g. with regard to: 
— the protection of savings, 
— equal conditions of competition, 
— fairness in commercial transactions, 
— consumer protection, 
— respect for the social legislation in force in each of 
the Member States. 1.6.1. Protection of savings — Penalties 
The text of the Directive should make it clear that only 
credit institutions which are licensed and subject to 
scrutiny in one of the Member States are permitted to 
take deposits from the public in the form of repayable 
funds. 
All the Member States should be required to prescribe 
penalties for infringements of this rule, applicable 
immediately an unlicensed institution bids for deposits 
from the public. 
1.6.2. Equal conditions of competition 
The Directive allows Member States to establish stricter 
standards than those laid down in Articles 3, 4, 9, 10 
and 14 in relation to credit institutions authorized by 
its competent authorities (sixth recital). This provision 
could give rise to 'reverse discrimination' to the detri­
ment of credit institutions licensed in the states in 
question. 
Such a situation will distort inter-firm competition. It 
does not seem to be compatible with the idea of a single 
market without internal frontiers. It could be avoided 
through greater harmonization. 
1.6.3. Fairness in commercial trans­
actions 
1.6.3.1. The Member States generally have laws to 
ensure fairness in commercial transactions. The purpose 
of these is on the one hand to ensure that competition 
between economic operators is not distorted and on the 
other to ensure that consumers are protected. 
1.6.3.2. Here we are concerned in particular with 
laws requiring that prices be clearly displayed, and in 
more general terms, that the conditions under which 
sales are made or services provided are made clear; also, 
laws preventing improper conditions being attached to 
sales or services, laws banning the offering of financial 
inducements and laws banning the door-to-door sale of 
certain products, etc. 
1.6.3.3. Rules of this kind may impede the free pro­
vision of services, but they are necessary to protect the 
public interest. They are the expression of the needs 
and aspirations of a specific socio-economic interest 
group. In the absence of coordination, harmonization 
and approximation of this area of the law, the existing 
rules will remain in force and will be applicable not 
only to branches of credit institutions in the country in 
which the law applies, but also to providers of services, 
even if licensed in their Member State of origin and 
even if the services provided appear on the list appended 
to the proposal for a Directive. 
No C 318/44 Official Journal of the European Communities 12. 12. 88 
1.6.3.4. The purpose of the draft Directive is to 
approximate the laws of the Member States relating 
to the supervision of credit institutions: this covers 
coordination of the conditions for access to the business 
and coordination of the minimum rules governing the 
continuous administrative supervision of credit insti­
tutions in the exercise of their business from the point 
of view of liquidity, solvency, the suitability of their 
managers and major shareholders, the minimization of 
risk in the reinvestment of deposits (Art. 10, equity 
participations) and good administrative and accounting 
mechanisms. 
1.6.3.5. The draft Directive must not — as this is 
not its purpose — have the effect of overriding the 
individual Member States' laws on fairness in commer­
cial transactions, or of forming an obstacle to what 
constitutes honest trading practices recognized as such 
by law or jurisprudence. 
1.6.4. Protection of consumers 
1.6.4.1. The civil law of the Member States generally 
includes rules designed to uphold public policy: legal 
incapacity, family and matrimonial law—in some cases 
designed to protect family assets—the prohibition or 
regulation of gambling and betting, the prohibition of 
usury etc. Some of these measures may be backed up 
by penalties. 
1.6.4.2. There are also laws of a mandatory or pro­
hibitory nature, to protect the interests of 'consumers' 
or private persons who enter into contracts. Here too 
these laws take account of the socio-economic back­
ground against which they are applied; they therefore 
exhibit considerable disparities which the Commission 
recognizes to be legitimate, as Article 15 of the Directive 
on consumer credit (^ allows the Member States to 
adopt more stringent provisions. 
1.6.4.3. The concept of the public good, applied to 
financial supervision, which can only be invoked by the 
Member States with regard to economic agents not 
licensed as credit institutions or services not listed in 
the Directive (recital No 11), is unconnected with the 
concept of public policy in civil and criminal law and 
the concept of mandatory and prohibitory, or directly 
applicable, laws in international civil law. Contract-
(!) Directive 87/102/EEC of 22 December 1986 on the approxi­
mation of the laws, regulations and administrative provisions 
of the Member States in relation to consumer credit. law provisions of this kind, are designed to protect the 
interests of the party deemed to be more vulnerable or 
less well informed. Although it is true that they can 
constitute an obstacle to the free provision of services, 
the interests in question require the continuation in 
force of the substantive laws of the Member States 
designed to protect the more vulnerable or less well 
informed party to a contract. 
1.6.4.4. The only solution is for the provisions of 
the Convention on the law applicable to contractual 
obligations, signed by the Member States in Rome on 
19 June 1980, to be implemented in all the Member 
States, at the latest to coincide with the entry into force 
of the draft Directive. The purpose of these provisions 
is, inter alia, to prevent the consumer being deprived 
of the protection of the mandatory provisions of the 
law of the country in which he/she is habitually resident 
(Art. 5 of the Convention). In this situation the case 
can only be heard in the courts of the country of 
residence (Convention between the Member States of 
the European Economic Community concerning legal 
jurisdiction and the execution of civil and commercial 
decisions, signed in Brussels on 16 September 1968, 
Article 13 as amended by Article 10 of the Convention 
of 9 October 1978). 
1.6.5. Respect for the social legislation 
of the Member States 
With regard to working conditions, it is assumed that 
the implementation of the Directive and in particular 
the application of the principle of home country control 
will, in the present state of Community law, not inter­
fere with the application of the social legislation of the 
host country. For instance a bank branch will be subject 
to the social legislation of its host country (e.g. require­
ment to establish a works council and provide that 
council with information) even if its head office is 
located in another Member State and is therefore sub­
ject to supervision by the authorities of that State. 
1.7. Indispensable nature of the principles concerned 
The Directive can only be approved if the principles 
under discussion here are respected and genuinely 
implemented. 
The Commission should provide assurances in this 
respect and amend the recitals and operative part of 
the draft Directive accordingly to ensure that there is 
no possible ambiguity in such a delicate matter. 
Once in force, the effect of the Directive will be to 
oblige each Member State to recognize the financial 
supervision exercised over credit institutions in other 
12. 12. 88 Official Journal of the European Communities No C 318/45 
Member States to be equivalent. It will also prevent the 
Member States—where services appearing on the 
attached list are concerned—from invoking the public 
interest to apply national laws on the supervision of 
economic operators to all persons or firms carrying out 
that activity on their territory. By adopting the Directive 
in Council, the Member States will be deemed to have 
recognized once and for all that, where licensed credit 
institutions and the listed services are concerned, the 
public interest, as defined in their domestic administrat­
ive provisions covering the supervision of credit insti­
tutions, is adequately protected by the rules, which are 
deemed to be equivalent, in force in this particular field 
in the other Member States. 
1.8. Social aspects 
1.8.1. Irrespective of the question of respecting the 
social legislation of the Member States (see point 1.6.5 
above), we are particularly concerned about the effect 
the Directive may have on jobs in credit institutions. 
But the jobs issue is quite separate from the Directive 
being prepared. The right of establishment and the 
right to provide services freely are principles which are 
applicable right now. The Directive's only aim is to 
regularize and regulate the implementation of these 
principles, which are directly and immediately appli­
cable, in the interest of legal security. 
The examination of this proposal does, however, pro­
vide an opportunity to tackle this problem, which is 
causing disquiet among those concerned. 
1.8.2. The Commission maintains that increased 
cross-border business by credit institutions will have a 
very beneficial effect on employment in the banking 
sector. 
Restructuring will probably be necessary. Rationaliz­
ation will no doubt be needed, as will higher levels of 
qualification. 
Vocational training programmes could be adopted, 
after consultation, to promote better adapted qualifi­
cations. 
1.8.3. But for all that, it is essential for management 
and labour to be informed and consulted and for the 
social dialogue to be stepped up, so as to find the best 
way of solving the employment problems that are likely 
to arise (*). 
(') See ESC Opinion of 27 April 1988 on the creation of a 
European financial area, especially point 3.6.2 (OJ No C 175, 
4. 7. 1988, p. 1). 1.9. Taxation 
In the ESC Opinion of 27 April 1988 on the creation 
of a European financial area, concern was expressed 
that certain financial activities would be shifted else­
where solely because of differences in Member States' 
tax laws. Such moves will be even easir when the 
proposed Directive comes into force. 
An effort must be made to harmonize the whole tax­
ation system. Pending this, we would repeat our view 
that general introduction of a withholding tax applied 
at a uniform rate in all the Member States to financial 
income of any kind may be a solution. 
1.10. Conclusions 
Providing that the principles and conditions listed above 
are respected, and subject to the following comments, 
the draft Directive, once amended, will be a suitable 
instrument for the realization of the internal market in 
the field of supervision of credit institutions in the 
interests of depositors and savers. 
2. Specific comments 
2.1. Article 1: Definition 
The Directive uses the same definition as the First 
Directive (77/780/EEC): a credit institution is 'an 
undertaking whose business is to receive deposits or 
other repayable funds from the public and to grant 
credits for its own account'. 
Given the emergence of new financial products and 
intermediaries, a broader definition than the 1977 one 
is needed in order to protect savers and consumers and 
maintain equal conditions of competition. It should 
include firms which offer credit without taking deposits 
or other repayable funds from the public. 
The general principle should be that all firms carrying 
out identical operations must do so in accordance with 
identical relevant rules. 
2.2. Article 3: Initial capital 
2.2.1. The constitutive elements of the 'capital' are 
not defined. The Commission should propose some 
harmonization here. 
No C 318/46 Official Journal of the European Communities 12. 12. 88 
2.2.2. The proposed text seems to reflect the diffi­
culties in determining initial capital. 
Article 3 (1) lays down a relatively high but quite 
arbitrary figure. 
Article 3 (2) allows an exception whose aim is under­
standable: to take account of institutions whose scope 
of business is restricted by law or statute, so as not to 
provoke social or economic difficulties or deprive them 
of the right of establishment and freedom to provide 
services which they are allowed under the Treaty. 
However, the limits to this exception are unclear. 
2.2.3. The solution could be for the minimum initial 
capital to be fixed in an objective manner, taking special 
account of: 
— the credit institution's proposed programme of 
activities, 
— the size of the organization needed to implement 
this programme, and 
— the time needed for the institution to be operational 
and for its performance to offset initial expenditure. 
2.2.4. Any extention of the programme of activities 
or of organizational facilities could be grounds for a 
corresponding increase in capital. 
2.2.5. For this to happen, the supervisory authorities 
would have to collaborate closely to establish the cri­
teria for determining the minimum capital necessary 
and, coordinate, under the aegis of the Commission, 
the standards they apply in this area in such a way as 
to bring about their harmonization. 
2.3. Article 4: Identity and suitability of shareholders 
or members holding a qualified participation {l) 
The definition of suitability—laid down in 
Article 3 (2) of Directive 77/780/EEC—is within the 
jurisdiction of the Member States. 
(') See Article 1: qualified participation means direct or indirect 
holding which amounts to 10% or more of the capital or of 
the voting rights or which enables the exercise of a significant 
influence within the meaning of Article 33 of Council Direc­
tive 83/349/EEC. 
This refers to the Seventh Council Directive of 13 June 
1983 based on Article 54 (3)(g) of the Treaty concerning 
consolidated accounts: 'Article 33. First paragraph. Where an 
undertaking included in a consolidation exercises a significant 
influence over the operating and financial policy of an under­
taking not included in the consolidation (an associated under­
taking) in which it holds a participating interest, as defined in 
Article 17 of Directive 78/660/EEC, that participating interest 
shall be shown in the consolidated balance sheet as a separate 
item with an appropriate heading. An undertaking shall be 
presumed to exercise a significant influence over another 
undertaking where it has 20% or more of the shareholders' 
or members' voting rights in that undertaking ...'. The criteria chosen by the Member States should be 
coordinated, and until this can be achieved, the super­
visory authorities should keep each other informed of 
the criteria adopted as part of the cooperation expected 
of them. 
2.4. Article 5: Single banking licence and abolition of 
endowment capital 
A single banking licence is only acceptable if, in addition 
to the current Directive, Community legislation is enact­
ed in the following areas: own funds, solvency ratios, 
control of large exposures and deposit guarantees. The 
drafting of the Community law on deposit guarantees 
will need to take account of the new allocation of 
responsibilities among the banking supervisory authori­
ties. 
2.5. Article 7: Third country institutions 
2.5.1. When a third country credit institution sets up 
a subsidiary in a Member State, this subsidiary is a 
company covered by laws of the Member States and is 
therefore subject to Community law. Consequently, it 
is entitled to benefit from the right of establishment 
and the right to provide services freely throughout the 
Community. 
The subsidiary will thus have access to the whole Euro­
pean market through being approved in a single Mem­
ber State. 
Such a situation in the opposite of that encountered by 
EEC credit institutions, who experience often insur­
mountable difficulties when seeking access to the ban-
ing market of certain third countries or who are allowed 
either to operate in certain geographical areas or to 
carry out only a limited number of operations. 
2.5.2. The Commission proposes that a request for 
a licence from a subsidiary of a third country credit 
institution (or the acquisition of a holding in an EEC 
credit institution by non-EEC interests) should not be 
considered until it has been verified that the third 
country in question grants reciprocal treatment. If it 
does not, examination of the request would be sus­
pended. The aim of this procedure is to bring about 
the opening of negotiations with the third country or 
countries concerned on setting up a fair system of 
reciprocity. 
The proposed procedure is approved bearing in mind 
the Community-wide effect of the single braking licence 
and its considerable economic importance. 
2.5.3. Subsidiaries of third country credit institutions 
which already have a licence to operate in a Member 
State should keep their licences subject to the terms of 
12. 12. 88 Official Journal of the European Communities No C 318/47 
Article 4 of Directive 77/780/EEC, and should not be 
allowed to benefit from the Directive being proposed 
until reciprocal treatment has been granted. 
2.6. Article 8: Initial capital and own funds 
2.6.1. It is essential that a credit institution should 
always have sufficient own funds in relation to the risks 
incurred. 
2.6.2. If these own funds are sufficient to meet the 
solvency ratios, there seems to be no point, from the 
point of view of banking supervision, to require that 
they be at least equal to initial capital, especially if the 
institution's programme of activities has been restricted 
and its organizational needs reduces (see point 2.2.3). 
2.6.3. In the course of a firm's activities, the question 
of maintaining initial capital is a matter of company 
law, and not of banking supervision. 
2.7. Article 9: Supervision of holders of qualified par­
ticipation (*) 
Reference is made here to the comments on 'suitability' 
in point 2.3 (Art. 4). 
The same problem is raised by the definition of 'prudent 
and sound management'. The criteria chosen by the 
Member States should be coordinated, and until this 
can be achieved, the supervisory authorities should keep 
each other informed of the criteria adopted as part of 
the cooperation expected of them. 
2.8. Article 10: Participations 
2.8.1. The question here is of qualified participations 
amounting to more than 10% of own funds in a firm 
which is neither a credit institution nor a financial 
institution, nor the subsidiary of a credit institution 
whose activity is a continuation of banking or its auxili­
ary services. 
2.8.2. The holding of such participations on a perma­
nent basis as an investment is allowed by law in some 
Member States but prohibited in others. 
2.8.3. Article 10 would oblige all Member States 
to recognize licences granted by those Member States 
whose laws do allow participations to be held—provid­
ed that the latter remained within the limits laid down 
in Article 10 of the Directive—but it would not oblige 
those Member States whose laws prohibit the holding 
of participations to allow credit institutions under their 
supervision to hold such participations. 
(!) See note 1, p. 46. 2.8.4. Such a situation would provide yet another 
deplorable example of reverse discrimination (see point 
1.6.2). 
2.9. Article 11: Sound administrative and accounting 
procedures; adequate internal control mechanisms 
This provision should be read in conjunction with 
Article 3 (6) of Directive 77/780/CEE. This requires 
licence applications to be accompanied by a description 
of the business activities envisaged and the organiza­
tional structure of the institution. 
As stated above (points 2.3 and 2.7), the appraisal 
criteria should be aligned more closely. Consequently, 
they should be examined by the competent authorities. 
2.10. Article 12: Host-country responsibilities 
2.10.1. Article 12.1 extends the list of information 
required to be provided to the competent authorities 
under Article 7 (1) of Directive 77/780/CEE. 
This extension of cooperation is welcomed. 
2.10.2. Notwithstanding the principle of home-
country control, pending eventual coordination the 
competent authorities of the host Member State remain 
responsible under Article 12 (2) for the supervision of 
credit institutions' liquidity. The host Member State 
retains sole responsibility for measures arising from the 
implementation of monetary policy. 
2.10.2.1. Reference is made here to the ESC Opinion 
on the creation of a European financial area and in 
particular to point 2, general comments. 
2.10.2.2. This clause is of a provisional nature: 
— until the instruments for measuring liquidity have 
been coordinated, as regards the supervision of 
liquidity, and 
— until a common monetary policy based on the exist­
ence of a central body has been brought into being, 
as regards measures resulting from the implemen­
tation of monetary policies. 
2.10.2.3. We are pleased that measures remaining 
the responsibility of the host Member State must not 
embody discriminatory or restrictive treatment based 
on the fact that the credit institution is authorized in 
another Member State. 
2.10.3. Under Article 12 (3) the competent authori­
ties of the host country may also take the necessary 
measures to require credit institutions authorized in 
No C 318/48 Official Journal of the European Communities 12. 12. 88 
other Member States to make sufficient provision 
against market risk in respect of operations on securi­
ties' markets in their territory. 
2.10.3.1. This is a very important exception to the 
principle of home-country supervision of branches. 
2.10.3.2. It is up to the Commission to study tech­
niques for delimiting positions in securities, foreign 
exchange, interest-rate risks, etc. and to co-ordinate the 
work of the competent authorities, so as to bring about, 
eventually, a harmonization of supervision techniques 
which would enable the competent authority in the 
home country to exercise overall control. 
2.10.3.3. At all events the text of the Directive should 
stipulate that any measures adopted in this area by the 
competent authorities of the host Member State must 
not embody discriminatory or restrictive treatment 
based on the fact that the credit institution is authorized 
in another Member State. 
2.11. Article 14: Professional secrecy 
This provision reinforces those contained in Article 12 
of Directive 77/780/CEE. 
The Directive's professional secrecy provisions do not 
in any way invalidate the powers of the Member States' 
criminal courts in this field. 
Generally speaking, the Directive should not lead to any 
modification of Member States' criminal legislation, 
especially as regards penalizing violations of tax legis­
lation. The criminal, criminal procedure and tax legis­
lation in force in each of the Member States must 
continue to apply to all economic agents, whether estab­
lished or not, operating in the area of the Member 
State's law where such legislation is applicable. 
2.12. Article 15: Sanctions 
Competent authorities which impose sanctions under 
Article 15 should inform the competent authorities in 
countries where branches of the credit institutions in 
question are based. 
2.13 Article 16: Scope of mutual recognition 
2.13.1. Credit institutions may benefit from mutual 
recognition if they meet the following two require­
ments: 
— they are authorized and supervised by the competent 
authorities of their home Member States, according 
to the provisions of the banking Directives, — they undertake activities which come within the 
agreed list in the Annex. 
2.13.2. This list seems fairly complete. It lists those 
transactions which form the basis of banking activities. 
2.13.3. However, this provision does not affect vol­
untary legal or statutory restrictions imposed on credit 
institutions by their private or public owners or guaran­
tors, limiting their freedom to engage in the activities 
listed. The following should also be considered as per­
missible forms of voluntary restriction within the mean­
ing of the Directive: measures which laws and statutes 
permit a Member State to adopt in favour of auton­
omous public corporations as part of overall govern­
ment policy or policy relating to public enterprises 
(e.g. in order to protect the state budget or enable the 
enterprise in question to fulfil its objectives; also, the 
'limited territory' principle and operating restrictions 
imposed on savings banks). 
2.13.4. The existence of a list does not mean that all 
credit institutions are obliged to carry on the activities 
enumerated. 
Neither does the list in itself prevent credit institutions 
from carrying on other activities. Clearly, if the other 
activity in question is the subject of specific rules, these 
will have to be observed. It is equally clear that this 
other activity may be monitored by the banking super­
visory authority if it is liable to place at risk the assets 
entrusted to the credit institution. This is, after all, the 
reason for the existence of prudential controls. 
2.13.5. A credit institution licensed in a Member 
State engaging in non-listed business will not enjoy 
mutual recognition as defined by the Directive in prep­
aration, but its right of establishment and freedom to 
provide services will not be otherwise affected. A non-
licensed institution engaging in listed business will be 
in the same situation. 
In such situations the host Member State can, in relation 
to the exercise of the right of establishment and the 
freedom to provide services, require adherence to spec­
ific provisions of its national laws or regulations on the 
part of institutions not authorized as credit institutions 
in their home Member State and with regard to activi­
ties not mentioned in the list, provided that on the one 
hand such provisions are compatible with Community 
law and seek to protect the public good and that such 
institutions or such activities are not subject to equiva­
lent legislation or regulation in their home Member 
State (see eleventh recital). 
12. 12. 88 Official Journal of the European Communities No C 318/49 
Paradoxically this could mean a non-licensed institution 
being subject to fewer formalities (see Art. 17 and 18) 
than a licensed one. 
2.13.6. Article 16 (2) introduces the concept of a 
'banking group'. 
2.13.6.1. The Commission has envisaged a situation 
where certain activities are carried on by specialized 
subsidiaries (leasing, factoring, dealing in securities, 
mortgage credit etc.). 
2.13.6.2. These subsidiaries come within the ambit 
of consolidated supervision Directive 83/350/CEE, but 
are not credit institutions within the meaning of Direc­
tive 77/780/CEE. 
2.13.6.3. However, the single licence and home 
country supervision, a principle established by the 
Directive currently in preparation, may be extended to 
these subsidiaries if the following conditions are met: 
— the parent undertaking or undertakings are author­
ized as 'credit institutions' in the Member State by 
whose law the subsidiary is governed, 
— the parent undertaking or undertakings hold 90% 
or more of the shares in the subsidiary, 
— the parent undertaking or undertakings have 
declared that they jointly and severally guarantee 
the commitments entered into by the subsdiary, 
— the subsidiary is included in the consolidated super­
vision of its parent undertaking, or of each of its 
parent undertakings, in accordance with Directive 
83/350/CEE. 
2.13.6.4. With regard to the first condition, what 
will happen if the parent undertakings are each licensed 
in a different Member State? 
2.14. Article 17: Conditions to be met by credit insti­
tutions wishing to benefit from mutual recog­
nition with regard to the right of establishment. 
Procedure to be followed by home country 
authorities and in dealings between authorities 
of home country and host country 
lAA.X. A credit institution wishing to establish a 
branch in another Member State is required to notify 
the authorities of its home Member State. 
The authority appraises the application and if the out­
come is favourable communicates within three months 
of notification the information it has received. 
It must be ensured that the appraisal process does not 
compromise the fundamental freedom of establishment 
which is enshrined in the Treaty. The three-month deadline seems too long. 
2.14.2. Before the branch of the credit institution 
commences its activities, the competent authority of the 
host Member State has three months following receipt 
of the communication to prepare for the supervision of 
the institution (see Art. 19) and if necessary to decide, 
in the interest of the public good, to prohibit the credit 
institution from engaging in some of the activities envis­
aged, where the conditions of authorization in its home 
country do not preclude such activities, but those activi­
ties are not contained on the list in the Annex. 
Here too it must be ensured that the host country's 
right to appraise the application does not compromise 
the fundamental freedom of establishment enshrined in 
the Treaty. 
2.15. Article 18: Conditions to be met by credit insti­
tutions wishing to benefit from mutual recog­
nition with regard to the freedom to provide 
services. Procedure to be following by home 
countries authorities 
A credit institution wishing to exercise the freedom to 
supply services in the territory of another Member 
State for the first time is simply required to notify the 
competent authorities of the home Member State of the 
activities included on the list in the Annex which it 
intends to undertake. 
2.16. Article 20: Powers of the Commission with 
regard to technical amendments 
2.16.1. The power, in accordance with certain pro­
cedures, to make 'technical amendments' to the Direc­
tive in preparation has been conferred on the Com­
mission. These 'technical amendments' are listed as 
follows: 
— extension of the activities on the list mentioned in 
Article 16 and set out in the Annex, 
— the amount of initial capital laid down in Article 3, 
— the list of categories of institution referred to in 
Article 3 (2), 
— the thresholds set in Article 10, 
— the fields in which the competent authorities must 
exchange information, as enumerated in Article 7 
(1) of Directive 77/780/CEE. 
2.16.2. The Commission submits its draft to a com­
mittee of representatives of the Member States. It 
adopts the measures envisaged if they are in accordance 
with the opinion of the committee. 
2.16.3. If there is disagreement, the Commission sub­
mits its proposal to the Council. 
No C 318/50 Official Journal of the European Communities 12. 12. 88 
2.16A. If the Council has not acted within a period 
laid down by itself, which may not exceed three months, 
the measures are adopted by the Commission. 
Done at Brussels, 29 September 1988. 
General considerations 
1. Over the last few months the Study Group on 
GATT/Uruguay Round has been monitoring the Uru­
guay Round negotiations. EC Commission officials 
have given informal briefings on specific subjects 
covered by the negotiating groups; the views of rep­
resentatives from contracting countries such as India, 
Brazil and the United States have been heard; the Study 
Group Rapporteur and Chairman have had contacts 
with the Director-General of the General Agreement on 
Tariffs and Trade (GATT) and Secretariat; GATT has 
been covered at ESC meetings with the countries of the 
European Free Trade Association (EFTA) and at a 
public hearing of the European Parliament's External 
Relations Committee; and the Secretariat of the external 
relations section has also kept the study group regularly 
supplied with extensive documentation from the speci­
alized press. 2.16.5. The power thus granted to the Commission 
to act on its own seems excessive. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT 
2. Major progress has been made since the Punta del 
Este declaration on the general objectives of the new 
round and during the sectoral negotiations which took 
place in 1987. This progress is pleasing both in terms 
of the volume of work carried out, and because of the 
active contributions of many delegations in determining 
the goals and procedures to be followed on the huge 
number of specific problems under negotiation. 
The current far more difficult stage began in January 
1988. This covers the negotiations proper, the sub­
mission of demands, and the offering of concessions by 
the individual contracting parties. 
A ministerial mid-term review is scheduled for the 
beginning of December. This will assess progress so far, 
providing a political boost for the further negotiations 
which should in principle finish by the end of 1990. Opinion on the 'GATT/Uruguay Round' negotiations: the current situation and future 
prospects from the viewpoint of relations between the European Community and the main 
industrialized countries, the developing countries and the State-trading countries 
(88/C 318/16) 
On 31 May 1988 the Economic and Social Committee, acting under the fourth paragraph of 
Article 20 of its rules of procedure, decided to draw up an Opinion on the current situation 
and the future perspectives of the GATT/Uruguay Round negotiations. 
The section for external relations, trade and development policy, which was responsible for 
preparing the Committee's work on the subject, adopted its Opinion on 16 September 1988. 
The rapporteur was Mr Romoli. 
At its 258th plenary session (meeting of 29 September 1988) the Economic and Social 
Committee adopted the following Opinion unanimously.