COMMISSION OF THE EUROPEAN COMMUNITIES 
COM C89) 190 final SYN 120 
Brussels, 29 May 1989 
••6JJ&! 
AMENDED PROPOSAL FOR A SECOND COUNCIL DIRECTIVE 
ON THE COORDINATION OF LAWS, REGULATIONS AND 
ADMINISTRATIVE PROVISIONS RELATING TO THE TAKING-UP AND 
PURSUIT OF THE BUSINESS OF CREDIT INSTITUTIONS 
AND AMENDING DIRECTIVE 77/780/EEC 
(presented by the Commission pursuant to the 
third paragraph of Article 149 of the EEC Treaty) 
GoV« tfo 
AMENDED PROPOSAL FOR A 
SECOND BANKING COORDINATION DIRECTIVE 
1. Explanatory memorandum 
1. On the 23th of February 1988 the Commission submitted to the Council a 
proposal for a Second Council Directive on the coordination of laws, 
regulations and administrative provisions relating to the taking-up and 
pursuit of the business of credit institutions and amending Directive 
77/780/EEC<1>. 
2. The Economic and Social Committee delivered its opinion*2) at its 258th 
session held in Brussels on 29 September 1988 and the European 
Parliament delivered its opinion at its session of 15 March 1989(3). 
3. An amended proposal has been drawn up in order to take into account the 
opinion delivered by these two institutions. Both the European 
Parliament and the Economic and Social Committee have endorsed the need 
for a Second Banking Coordination Directive which together with 
Directive on own funds of credit institutions and the proposal for a 
solvency ratio for credit institutions are the key components of 
harmonisation necessary for the achievement of mutual recognition. 
4. The Commission was able to accept most of the amendments proposed by the 
European Parliament which clarify and strengthen the provisions 
regarding prudential supervision. 
TT5 OJ No L 322, 17.12.1977, p. 30 
(2) OJ NO C 318, 12.12.1988, p. 42 
(3) 
- 2 -
Recital 14 
The amendment regarding the mutual recognition of financial techniques in 
the field of mortgage credit was asked by the European Parliament; it 
clarifies the purpose of this recital. 
Article 4 
This amendment reinforces the provision relating to the supervision of 
major shareholders. Thus it ensures that the banking supervisory 
authorities are bound to refuse the granting of a banking license if they 
consider that shareholders or members are not suitable persons, and could 
endanger the sound and prudent management of the credit institution. 
Article 7 
The proposed amendment to Article 7 will simplify its application and will 
clarify the reciprocity provisions governing the establishment in the 
Community of subsidiaries of banks from non-Community countries. The main 
elements of the revised reciprocity provisions in the banking sector are as 
fol lows: 
requests for authorisation by non-EC banks have to be notified to 
the Commission by Member States, but no automatic suspension is provided 
for during the Commission enquiries on the situation of Member countries 
banks in the relevant countries; 
- the Commission will examine how Community banks are treated in third 
countries periodically with a first report before the Directive comes 
into effect; 
- where the Commission finds that a third country is not granting the 
Community's credit institutions market access and competitive 
opportunities comparable to those granted by the Community to non-EEC 
banks, then the Commission may submit suitable proposals to the Council 
for negotiations with the third country in question. 
- 3 -
- where it seems to the Commission that the Community's banks do not enjoy 
"national treatment" and the same competitive opportunities as the third 
countries' own credit institutions, and that the condition of effective 
market access has not been secured, the Commission may "limit or suspend 
new authorisations and acquisitions by a parent undertaking governed by 
the third country in question". 
The new article makes clear that "national treatment" must really work in 
practice, ensuring effective market access in the third country. There may 
be situations where on the face of it the Community institution is given 
the same rights of establishment as a domestic bank, but is excluded from 
the market by other means. In these circumstances the Commission would be 
able to act. But any country providing genuine national treatment to 
Community banks would be under no threat. 
Article 16 § 1 
First paragraph 
This amendment states clearly what was already mentioned in recital 14 of 
the Directive regarding the mutual recognition of financial techniques. 
Host Member States could, however, prohibit the provision of certain 
banking services or products, if they can prove that the provision of such 
services or products would violate the general good as it is defined in the 
European Court's jurisprudence. 
Second paragraph 
This provision is considered necessary in order to accomodate the problems 
encountered by a number of regional savings banks in Germany which are 
confined under the terms of their licences to operating within a limited 
geographical area. The German Government wants to retain the right of their 
banking authorities to impose such territorial limits and the saving banks 
in question apparently prefer to preserve the existing arrangements. The 
- 4 -
derogation provided by new amendment to the general rules of Article 16 § 
1, i.e. the right for credit institutions to provide services on the whole 
territory of the Community, is proposed subject to the provisions that (a) 
the local banks in question remain subject to all the prudential 
requirements imposed by Community legislation, (b) there are no barriers to 
competition from banks having their head office in other Member States. 
Article 19 § 3 
This amendment makes it clear that any duly authorised credit institution 
must be allowed full access to all the normal means of mass-advertising of 
its services and products, in particular all forms of television and 
newspapers advertisement. This would be in accordance with the 
jurisprudence of the European Court most recently expressed in the Bond 
Van Adverteerders Judgement and would remove any doubt, which might exist. 
It would remain open to Member States to regulate the form and content of 
advertisements and also to control such practices as doorstep-selling or 
"cold-calling", where such regulations are justified by the general good. 
List of banking activities 
The amendments regarding some items of the list are considered necessary in 
order to clarify the text and to bring it more closely in line with the 
list of services annexed to the proposal for an Investment Services 
Directive which are more and more frequently also performed by banks in 
most of the Member States. 
AMENDED PROPOSAL FOR A SECOND COUNCIL DIRECTIVE 
ON THE COORDINATION OF LAWS, REGULATIONS AND 
ADMINISTRATIVE PROVISIONS RELATING TO THE TAKING-UP AND 
PURSUIT OF THE BUSINESS OF CREDIT INSTITUTIONS 
AND AMENDING DIRECTIVE 77/780/EEC 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Preamble and recitals 1 to 13 unchanged 
Recital 14 Recital 14 
Whereas, the Member States should ensure 
that there are no obstacles to the 
activities benefiting from mutual 
recognition being undertaken using the 
financial techniques of the home Member 
State, as long as the latter are not in 
violation of the legal provisions 
governing the public good In the host 
Member State; Whereas, the Member States should 
ensure that there are no obstacles to 
the activities benefiting from mutual 
recognition being undertaken using the 
financial techniques of the home Member 
State, as long as the latter are not In 
violation of the legal provisions 
governing the general good in the host 
Member State. In this respect the 
present directive should be seen In 
conjunction with the Council Directive 
on the freedom of establishment and the 
right to provide services In the field 
of mortgage credit, which lays down 
provisions regarding the mutual 
recognition of financial techniques; 
Remainder of the recitals unchanged 
HAS ADOPTED THIS DIRECTIVE: 
- 2 -
Articles 1 to 3 unchanged 
Article 4 Article 4 
Competent authorities shall not grant 
authorization permitting the taking-up 
of the business of a credit institution 
before they have been Informed of the 
Identity of shareholders or members, 
whether direct or Indirect, be they 
physical or legal persons, holding a 
qualified participation and of the 
amount of such participations. The 
competent authorities shall appraise the 
suitability of the abovementloned 
shareholders or members. Competent authorities shall not grant 
authorization permitting the taklng-up 
of the business of a credit institution 
before they have been Informed of the 
identity of shareholders or members, 
whether direct or indirect, be they 
physical or legal persons, holding a 
qualified participation and of the 
amount of such participations. The 
competent authorities shall not grant 
authorization If, taking Into account 
the need to assure a sound and prudent 
management of the credit Institution, 
they are not satisfied as to the 
suitability of the abovementloned 
shareholders or members. 
Articles 5 and 6 unchanged 
- 3 -
TITLE 2 A 
Reciprocity 
Article 7 Article 7 
1. Requests for authorization of a 
subsidiary whose parent undertaking Is 
governed by the laws of a third country 
or the acquisition of a participation 
therein as provided for in paragraph 3 
shall be subject to the procedure laid 
down in this Article. 1. The competent authorities of the 
Member States shall Inform the 
Commission (a) of any request for 
authorization of a subsidiary whose 
parent undertaking or undertakings Is 
governed by the laws of a third country 
and of the Identity of the ultimate 
parent, or (b) whenever such an 
undertaking acquires participation In a 
credit Institution of the Community, so 
that the latter would become Its 
subsidiary. The Commission shall Inform 
the other Member States. 
When authorization is granted to a 
subsidiary the identity of the ultimate 
parent undertaking or undertakings must 
be specified In the notification which 
the competent authorities must address 
to the Commission, according to Article 
3. paragraph 7. of the Directive 
77/780/EEC. 
2. The competent authorities of the 
relevant Member State shall inform the 
competent authorities of the other 
Member States and the Commission of the 
request for authorization. 2. The Member States shall Inform the 
Commission of any general difficulties 
encountered bjr their credit 
Institutions In establishing or 
carrying out banking activities In any 
third country. 
:*-•-. ïàç--r-i»wv 
_ 4 -
3. In the same manner, when Informed, 
according to the provisions of Article 
9, that an undertaking governed by the 
laws of a third country Is considering 
the acquisition of a participation In a 
credit institution such that the latter 
would become Its subsidiary, the 
competent authorities of the relevant 
Member state shall Inform the competent 
authorities of the other Member States 
and the Commission. 3. The Commission shall, initially not 
later than six months before the 
Directive enters Into force and then 
periodically, draw up a report 
examining the treatment of Community 
credit Institutions, in the terms 
referred to In paragraphs 4 and 5 
below, regarding the establishment and 
carrying out of banking activities, and 
the acquisition of participations In 
credit institutions of third countries. 
The Commission shall submit these 
reports to the Council of Ministers. 
4. The competent authorities of the 
Member State concerned must suspend 
their decision regarding requests as 
referred to In paragraphs 2 and 3 until 
the procedure provided for in paragraphs 
5 and 6 Is completed. 4. Where It appears to the Commission, 
either on the basis of the report 
referred to in paragraph 3 or at any 
other time, that a third country Is not 
granting to credit institutions of the 
Community effective market access and 
competitive opportunities comparable to 
those accorded by the Community to 
credit Institutions of that third 
country, the Commission may submit 
suitable proposals to the Council with 
a view to achieving such comparable 
access anc competitive opportunities 
through negotiations between the 
Community and the third country In 
question. 
- 5 -
5. The Commission shall, within three 
months of receiving the information 
provided for In paragraphs 2 and 3 
examine whether all credit Institutions 
of the Community enjoy reciprocal 
treatment, in particular regarding the 
establishment of subsidiaries or the 
acquisition of participations In credit 
institutions in the third country in 
quest ion. 5. Where it appears to the Commission, 
either on the basis of the reports 
referred to In paragraph 3 or at any 
other time, that credit Institutions of 
the Community do not enjoy national 
treatment and the same competitive 
opportunities as domestic credit 
Institutions In a third country and 
that the condition of effective market 
access has not been secured, the 
Commission may In addition to the 
proposals for negotiations referred to 
In paragraph 4 decide that the 
competent authorities of the Member 
States shall limit or suspend their 
decisions regarding requests for new 
authorizations and acquisitions by a 
parent undertaking governed by the 
third country In question, using the 
procedure provided for In Article 20. 
The duration of the measures concerned 
may not exceed one year, though the 
Commission may propose their renewal. 
6. If the Commission finds that 
reciprocity is not ensured if may extend 
suspension of the decision referred to 
In paragraph 4, using the procedure 
provided for In Article 20. 6. Measures taken under this article 
shall be subject to their conformity 
with the Community's obligations under 
any International agreements, whether 
bilateral or multinational, which cover 
the operation of credit Institutions. 
- 6 -
7. The Commission shall present suitable 
proposals to the Council with a view to 
achieving reciprocity with the third 
country In question. 
Articles 8 to 15 unchanged 
Article 16 Article 16 
1. Member States shall ensure that at 
least the activities set out on the list 
In the Annex may be pursued In any 
Member State, in accordance with the 
provisions of Articles 17 to 19, either 
by the establishment of a branch or by 
way of the provision of services, by any 
credit institution authorized and 
supervised by the competent authorities 
of the home Member State, In accordance 
with the provisions of this Directive, 
whose authorization permits the pursuit 
of such activities. 1. Member States shall ensure that (two 
words deleted) the activities set out 
j_n the list in the Annex may be pursued 
In any Member State, in accordance with 
the provisions of Articles 17 to 19, 
either by the establishment of a branch 
or by way of the provision of services, 
by any credit Institution authorized 
and supervised by the competent 
authorities of the home Member State, 
In accordance with the provisions of 
this Directive, provided that such 
activities are covered by the 
authorization. Member States shall 
permit these activities to be 
undertaken by credit Institutions using 
the financial techniques of the home 
Member State as long as the latter are 
not In violation of the legal 
provisions governing the general good 
In the host Member State. 
- 7 -
However. Member States may limit the 
scope of the authorization to only a 
part of their territory with regard to 
public credit Institutions whose 
business Is guaranteed by a regional 
government or local authority. Such 
limitation shall not exempt such credit 
Institutions from provisions in other 
EEC Directives related to credit 
Institutions. 
2. Member States shall also provide that 
at least the activities set out on the 
list In the Annex may be pursued In any 
Member State In accordance with the 
provisions of Article 17 to 19, either 
by the establishment of a branch or by 
way of the provision of services by any 
financial Institution being a subsidiary 
of a credit Institution, or such a 
subsidiary belonging to several credit 
Institutions, whose articles of 
association do not prevent the pursuit 
of those activities and which meets each 
of the following conditions: 2. unchanged 
- the parent undertaking or 
undertakings are authorized 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, 
- 8 -
the parent undertaking or 
undertakings have declared that they 
jointly and severally guarantee the 
committments entered into by the 
subsidiary, 
the subsidiary Is effectively 
included, In particular for the 
activities In question, In the 
consolidated supervision of Its 
parent undertaking, or of each of Its 
parent undertakings, In accordance 
with Directive 83/350/EEC, notably 
for the calculation of the solvency 
ratio, for the control of large 
exposures and for the purposes of 
limiting participations In accordance 
with Article 10 of this Directive. 
Conformity with these conditions must be 
verified by the competent authority of 
the home Member State and the latter 
must supply the subsidiary with a 
certificate of compliance which must 
form part of the notification envisaged 
In Articles 17 and 18. 
The competent authority of the home 
Member State must ensure the supervision 
of the subsidiary In accordance with the 
provisions of Articles 8(1), 9, 11, 
12(2), 13, 14 and 15 of this Directive, 
as well as those of Article 7(1) of 
Directive 77/780/EEC. 
- 9 -
The provisions mentioned In this 
paragraph shall be applicable to 
subsidiaries subject to the necessary 
modifications. In particular, "credit 
institution" should read "financial 
institution, conforming to the 
conditions laid down in Article 16(2)", 
and "authorization" as "articles of 
association". In Article 17(2), point 
(c) should read "the amount of own' funds 
of the subsidiary financial Institution 
and the consolidated solvency ratio of 
the credit Institution which Is the 
parent undertaking". 
If the financial Institutions 
benefitting from the provisions of this 
paragraph should cease to meet any of 
the requisite conditions, the host 
Member State may bring an end to the 
pursuit, under the provisions of this 
Directive, of the activities In question 
on its territory. 
Articles 17 and 18 unchanged 
Article 19 Article 19 
1. Responsibility for the supervision of 1. unchanged 
a credit Institution, Including 
supervision of activities undertaken 
according to the provisions of Article 
16, shall rest with the competent 
authorities of the home Member State. 
- 10 -
2. Host Member States may require, for 
statistical purposes, that all credit 
institutions having branches In their 
territories shall report quarterly on 
their operations In the host Member 
State to the competent authority of that 
host Member State. 2. Host Member States may require, for 
statistical purposes, that all credit 
Institutions having branches In their 
territories shall report regularly on 
their operations in the host Member 
State to the competent authority of 
that host Member State. 
In order to conform with the 
responsibilities laid down In Article 
12(2) and (3), host Member States may 
require that branches of credit 
institutions from other Member States 
provide the same Information as they 
require from their national credit 
Institutions for that purpose. 
3. If the competent authority of the 
host Member State ascertains that an 
institution having a branch or providing 
services In Its territory Is not 
complying with the legal provisions In 
force In that Member State which are 
justified on the grounds of the public 
good, or pursuant to the provisions of 
this Directive, on the powers of the 
host Member State, that authority shall 
request the Institution concerned to put 
an end to the Irregular situation. 3. If the competent authority of the 
host Member State ascertains that an 
Institution having a branch or 
providing services in Its territory Is 
not complying with the legal provisions 
In force In that Member State which are 
Justified by the general good, or 
pursuant to the provisions of this 
Directive, on the powers of the host 
Member State, that authority shall 
request the institution concerned to 
put an end to the Irregular situation. 
Nothing In this paragraph shall prevent 
credit Institutions having their head 
office in another Member State 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 Justified by the 
general good. 
- 11 -
4. If the Institution concerned falls to 
take the necessary steps, the competent 
authority of the host Member State shall 
Inform the home Member State 
accordingly. The authority of the home 
Member state shall take, In the shortest 
time possible, all appropriate measures 
to ensure that the Institution concerned 
puts an end to the irregular situation. 
The nature of those measures shall be 
communicated to the competent authority 
of the host Member State. 4. unchanged 
5. If, despite the measures taken by the 
home Member State pursuant to paragraph 
4, or because such measures prove 
inadequate or are not taken by the 
Member State In question, the 
Institution persists In violating the 
legal rules referred to In paragraph 3 
In force In the host Member State, the 
latter State may, after Informing the 
competent authority of the home Member 
State, take appropriate measures to 
prevent further Irregularities 
including, insofar, as Is necessary, the 
prevention of the initiation of further 
transactions by that institution within 
its territory. The Member States shall 
ensure that within their territory It Is 
possible to serve the legal documents 
necessary for these measures on credit 
Institutions. 5. unchanged 
- 12 -
6.- Any measure adopted pursuant to 
paragraphs 3, 4 and 5 involving 
penalties or restrictions on the 
provision of 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 
whose authorities adopted It. 6. unchanged 
7. Before following the procedure set 
out In paragraphs 3, 4 and 5, the 
competent authorities of the host Member 
State, may, In exceptional 
circumstances, take measures necessary 
to protect the interests of depositors, 
investors and others to whom services 
are provided. The Commission and the 
other Member States shall be Informed of 
such measures In the shortest possible 
time. In this event the Commission may, 
after consulting the Member States 
concerned, decide that the Member State 
In question shall amend or abolish the 
measures. 7. unchanged 
8. In the event of withdrawal of 
authorization the competent authority of 
the host Member State shall be Informed 
and shall take appropriate measures to 
prevent the institution concerned from 
undertaking further transactions In its 
terrItory. 8. unchanged 
- 13 -
9. Member States shall inform the 9. unchanged 
Commission of the number and type of 
cases in each Member State In which 
there has been a refusal pursuant to 
Article 17 or in which measures have 
been taken In accordance with the 
provisions of paragraph 5 of this 
Article. Every two years, the Commission 
shall submit a report summarizing such 
cases to the Advisory Committee set up 
under Article 11 of Directive 
77/780/EEC. 
Remainder of Articles unchanged 
ANNEX 
Business which Is integral to banking and shall be Included 
within the scope of mututai recognition 
1. Deposit-taking and other forms of 
borrowing 
2. Lending*1* 
3. Financial leasing 
4. Money transmission services 
5. Issuing and administering means of 
payment (credit cards, travellers 
cheques and bankers drafts) 
6. Guarantees and commitments 
7. Trading for own account 
account of the customers in or for 
(a) money market instruments 
(cheques, bills, CDs, etc.) 
(b) foreign exchange 
(c) financial futures and options 
(d) exchange and intereet rate 
instruments 
(e) securities 
8 Participations in securities issues 
and the provision of services related 
to such issues 
(1) including in particular: 
- consumer credit, 
- mortgage lending, 
- factoring and invoice discounting, 
- trade finance (including forfeiting) 1. Deposit-taking and other forms of 
borrowing 
2. Lending*1* 
3. Financial leasing 
4. Money transmission services 
5. Issuing and administering means of 
payment (credit cards, travellers 
cheques and bankers drafts) 
6. Guarantees and commitments 
7. Trading for own account or for 
account of the customers in foreign 
exchange 
8. investment activities2 (trading 
for own account or account of the 
customersT 
(a) Brokerage, i.e. the acceptance 
of investors' orders relating to 
any or all of the instruments" 
"referred to in footnote 2 and/or" 
"the execution of such orders on 
"an exchange or market on an" 
agency basis against payment of" 
commission. 
(2) Instruments 
- Transferable securities including units 
in undertakings for collecting invest­
ment in transferable securities. 
- Money market instruments (including 
certificates of deposit and Euro-
commercial paper) 
- Financial futures and options. 
- Exchange rate and Intereet rate 
Instruments. 
(b) Dealing as principal. I.e. the 
purchase and eale of any or all 
of the instruments referred to 
In footnote 2 for own account 
and at own risk with a view to 
profiting from the margin 
between bid and offer prices. 
(c) Market making. I.e. maintenance 
of a market In any or all of the 
Instruments referred to In 
footnote 2 by dealing In such 
Instruments, 
(d) Portfolio management. I.e. the 
management against payment of 
portfolios composed of any or 
all of the Instruments referred 
to In footnote 2 undertaken for 
Investors otherwise than on a 
collectlve basis. 
(e) Arranging or offering 
underwriting services In respect 
of Issues of the Instruments 
referred to In footnote 2 and 
distribution of such Issues to 
the pub Ilc. 
(f) Professional Investment advIce 
given to Investors on an 
Individual basis or on the basis 
of private subscription In 
connsctlon with any or all of 
the instruments referred to In 
footnote 2. 
(g) Safekeeping and admins Itrat Ion 
of any of the Instruments 
referred to In footnote 2 
otherwise than In connection 
with the management of a 
clearing system. 
9. Money broking 
10. Portfolio management and advice 
11. Safekeeping of securities 
12. Credit reference services 
13. Safe custody services 9. Money broking 
10. Credit reference services 
11. Safe custody services 

Commission of the European Communities 
COM(89) 190 final 
Amended proposal for a 
SECOND COUNCIL DIRECTIVE 
on the coordination of laws, regulations and administrative provisions 
relating to the taking-up and pursuit of the business of credit institutions 
and amending Directive 77/780/EEC 
(presented by the Commission pursuant to Article 149(3) of the EEC 
Treaty) 
29.5.1989 
Office for Official Publications of the European Communities 
L - 2985 Luxembourg 
Series: DOCUMENTS 
1989 — 20 pp. — Format: 21.0 * 29.7 cm 
EN 
ISSN 0254-1475 
ISBN 92-77-50542-7 
Catalogue number: CB-CO-89-213-EN-C 
ISSN 0254-1475 
COM(89) 190 final 
DOCUMENTS 
Amended proposal for a 
SECOND COUNCIL DIRECTIVE 
on the coordination of laws, regulations and 
administrative provisions relating to the taking-
up and pursuit of the business of credit 
institutions and amending Directive 77/780/EEC 
(presented by the Commission pursuant to 
Article 149(3) of the EEC Treaty) 
06 18 
Catalogue number: CB-CO-89-213-EN-C 
ISBN 92-77-50542-7 29.5.1989 
€ 
COMMISSION OF THE EUROPEAN COMMUNITIES