COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(91) 284 final 
Brussels, 26 July 1991 
Proposal for a 
ÇQUNQL DIRECTIVE 
implementing Directive 89/299/EEC on the 
Own Funds of credit institutions 
(presented by the Commission) 

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EXPLANATORY MEMORANDUM 
I • General 
1. On 17 April 1989 the Council adopted the Own Funds 
Directive (89/299/EEC) and established the definition 
of the own funds of credit institutions including the 
way by which total own funds are to be calculated. With 
regard to the "Fund for General Banking Risks" (FGBR) 
there was no final allocation. Article 6(2) states: 
"The item referred to in Article 2(1)(4) [which is the 
FGBR] shall constitute a separate category. 
Provisionally, it shall be included in own funds 
without limit, but shall not be included when the basis 
of the limit for the items referred to in points 3 and 
5 to 8 is fixed. Within six months of the 
implementation of this Directive the Commission shall, 
in accordance with the procedure provided for in 
Article 8, propose the final treatment for this item 
either in original own funds or in additional own 
funds." 
2. There are several reasons arguing in favour of deciding 
the final allocation of the "Fund for General Banking 
Risks" : 
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the Basle Committee on Banking Regulations decided 
at its meeting of 13 December 1990 to include the 
FGBR as "Tier One Capital" and this decision has 
been endorsed by the Committee of Central Bank 
Governors of the G-10 countries. Therefore the 
"discussions in international fora" have produced 
the expected result and a Community decision can 
be taken having regard and in conformity with the 
recommended treatment of such amounts at 
international level. The Commission participated 
fully in these discussions and is in complete 
agreement with the conclusions; the Banking 
Advisory Committee has also conveyed its unanimous 
approvaI ; 
Member States are at present transposing the Own 
Funds Directive into national legislation and the 
banking community is becoming familiar with the 
new rules. Therefore it is expedient to reach a 
final solution as early as possible in order to 
give the right and definitive information to 
marketplayers; 
the calculation of the Solvency Ratio as well as 
other prudential yardsticks (participations, large 
exposures) should be done on an as stable basis as 
possible and changes should be kept to those 
really necessary, etc. 
For ail these reasons the FGBR is included within the 
category of "original own funds" together with the 
other two elements "capital" and "disclosed reserves" 
("core capital"). The FGBR should henceforth be 
included when the basis of the limit for the 
"additional own funds" is fixed according to Article 
6(1) of the Own Funds Directive. 
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Although the Commission has proposed, by way of a 
Directive amending the Own Funds Directive the 
introduction of the "Comltology Procedure" in Article 8 
of the said Directive it is, for reason given under 
point 2, expedient to come to the final allocation of 
the FGBR and not to hold up that decision until the 
proposed amending Directive has been adopted. The 
Parliament will be fully informed on this matter. 
I I . Examination of the articles 
Art icle 1.1. 
This article definitively includes in article 6(1) of the 
Own Funds Directive the "Fund for General Banking Risks" 
together with the other two elements, capital and disclosed 
reserves, within the category of original own funds. 
Art icle 1.2 
This article deletes article 6(2) of the Directive as a 
result of article 1.1 before commented. 
Art icle 2 
This article asks the Member States first to take the 
measures necessary to comply with the Directive before the 
1st January 1993, second to make express reference to this 
Directive in the provisions adopted and third to communicate 
such provisions to the Commission. 
Art içle 3 
This article makes the general reference that the Directive 
is addressed to the Member States. 
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Proposal for 
a Counc il D i rectIve 
implementing Directive 89/299/EEC on the 
Own Funds of credit institutions 
THE COUNCIL OF THE EUROPEAN COMMUNITIES 
Having regard to the Council Directive 89/299/EEC of 
17 April 1989 on the own funds of credit institutions^1^ 
and in particular Articles 6(2) and 8 thereof; 
Having regard to the proposal from the Commission; 
Whereas on 17 April 1989 the Council adopted the Own Funds 
Directive (89/299/EEC) and established the definition of the 
own funds of credit institutions including the way by which 
total own funds are to be calculated; 
Whereas, with regard to the Fund for General Banking Risk in 
the sense of Article 38 of the Council Directive 
(86/635/EEC) of 8 December 1986 on the annual accounts of 
other financial institutions^2^ there was no final 
allocation, it states in Article 6(2) of the above mentioned 
Directive that within six months of the date of 
implementation the Commission shall propose the final 
treatment of the Fund for General Banking Risk either in 
original own funds or in additional own funds, in accordance 
with the procedure provided for in Article 8; 
Whereas having regard to the opinion of the Banking Advisory 
Committee and taking into account the results of discussions 
in international fora and in conformity with th- treatment 
of the Fund for General Banking risks at international 
level, these are included within the category of original 
own funds. 
HAS ADOPTED THIS DIRECTIVE: 
(1) OJ No L 124, 5.5.1989, p. 16 
(2) OJ No L 372, 31.12.1989, p. 1 
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Artlçlo 1 
1. Article 6(1) of Directive 89/299/EEC is hereby replaced 
by the foI low i ng: 
"1. The items referred to in Article 2(1), points 3 and 
5 to 8 shall be subject to the following limits: 
(a) the total of items 3 and 5 to 8 may not exceed 
a maximum of 100% of items 1 plus 2 and 4 
m i nus 9, 10 and 11 ; 
(b) the total of items 7 and 8 may not exceed a 
maximum of 50% of items 1 plus 2 and 4 minus 
9, 10 and 11 ; 
(c) the total of items 12 and 13 shall be deducted 
from the total of the items. 
2. Article 6(2) of Directive 89/299/EEC is deleted 
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Article. 2 
1. Member States shall bring into force the laws, 
regulations and administrative provisions necessary to 
comply with this Directive not later than 1 January 
1993. 
2. When Member States adopt these measures, they shall 
contain a reference to this Directive or shall be 
accompanied by such reference on the occasion of their 
official publication. The methods of making such a 
reference shall be laid down by the Member States. 
3. Member States shall communicate to the Commission the 
text of provisions of national law which they adopt in 
the field governed by this Directive. 
ArtlsH 3 
This Directive is addressed to the Member States 
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FINANCIAL STATEMENT 
This proposal will not entail any cost to the budget of the 
European Communities 
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IMPACT ON COMPETITIVENESS AND EMPLOYMENT 
i• what is the main Just ificatIon for the measure? 
There are two reasons to implement the Own Funds Directive 
at this stage : 
(a) according to this Directive within six months of its 
date of implementation, the Commission shall propose 
the final treatment of the "Fund for General Banking 
R isks" ; 
(b) the treatment of the "Fund for General Banking Risks" 
at international level permits its final allocation 
according to the criteria adopted in international 
fora . 
• I• Characteristics of the enterprises concerned 
The enterprises concerned under this Directive are all 
credit institutions autorized in the Community. 
Ml. What are the obi Igat tons Imposed directly pji 
enterpr ise§? 
According to the proposal, Member States may include the 
"Fund for General Banking Risks" within the category of 
original own funds of credit institutions. 
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IV. What obligations are likely to be imposed indirectly on 
enterprises through local authorities? 
None 
V. Are there special measures for SMEs? Li SJSL, Qf what 
kind? 
None 
VI . What is the anticipated effect on: 
(a) the competitiveness of enterprises? 
(b) employment? 
(a) By granting the same definition pertaining the original 
own funds it is ensured that credit institutions can 
engage in direct competition in a common banking 
market. 
(b) An adequate treatment of the own funds of credit 
institutions serves to ensure the continuity and 
therefore to protect savings and employment. 
VII. Have the social Partners been consulted? What are their 
views? 
NO. The measure proposed has no impact on the industrial 
relationships and the level of employment. 
ISSN 0254-1475 
COM(91) 284 final 
DOCUMENTS 
EN 08 
Catalogue number : CB-CO-91-352-EN-C 
ISBN 92-77-74889-3 
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