EN Official Journal of the European Union C 62/1

OPINION OF THE EUROPEAN CENTRAL BANK

of 28 January 2011

on a proposal for a directive of the European Parliament and of the Council amending Directives 98/78/EC, 2002/87/EC and 2006/48/EC as regards the supplementary supervision of financial entities in a financial conglomerate

(CON/2011/6)

2011/C 62/01

Introduction and legal basis

On 30 September 2010, the European Central Bank (ECB) received a request from the Council of the European Union for an opinion on a proposal for a directive of the European Parliament and of the Council amending Directives 98/78/EC, 2002/87/EC and 2006/48/EC as regards the supplementary supervision of financial entities in a financial conglomerate (1) (hereinafter the ‘proposed directive’).

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union since the proposed directive contains provisions affecting the European System of Central Banks’ contribution to the smooth conduct of policies relating to the stability of the financial system, as referred to in Article 127(5) of the Treaty. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

General observation

1. The ECB welcomes the main aim of the proposed directive, which is to ensure the appropriate scope of supplementary supervision of financial conglomerates, by closing the gaps that have evolved between the Union’s supplementary supervision regime (2) and the sectoral directives relating to banking and insurance services.

Specific observations

Treatment of mixed financial holding companies

2. The ECB welcomes the references to a ‘mixed financial holding company’ in the provisions of the sectoral directives defining the scope of consolidated banking supervision and group insurance supervision (3). This will allow the application of sectoral consolidated/group supervision, in addition to supplementary supervision, of a financial holding company or an insurance holding company which, as a result of an expansion of activities to another financial sector, becomes a mixed financial holding company. The ECB considers that supervisory insights related to sectoral activities achieved through consolidated/group supervision could indeed be usefully complemented by the understanding of cross-sectoral risks achieved through supplementary supervision. At the same time, efficient supervisory practices should be developed, which on the one hand will allow for all relevant risks to be incorporated in the supervision, and, on the other hand, will eliminate potential overlaps in supervision and preserve a level playing field. The ECB recommends (4) giving the European Supervisory Authorities (ESA) powers to adopt, through the Joint Committee, common guidelines in this respect.

Treatment of asset management companies

3. The ECB welcomes the explicit inclusion of asset management companies in the threshold tests for the identification of financial conglomerates (5). The ECB recommends (6) allocating asset management companies to the sector within the financial conglomerate with which they have the closest connection, to be further specified in supervisory guidelines. This solution will be superior from the perspective of risk-based assessment than the allocation to the ‘smallest financial sector’ foreseen by the proposed directive. Moreover, the ECB recommends (7), as a consequence of the explicit inclusion of asset management companies in the supplementary supervision regime, involving the European Securities and Markets Authority, alongside the other ESA, in the development of guidelines promoting convergence of supervisory practices concerning supplementary supervision (8). In this respect, the wording should be similar to that contained in Directive 2010/78/EU (9), i.e. ‘the relevant ESA, through the Joint Committee’. The involvement of all relevant ESA in the development of such guidelines should ensure that contagion, concentration and complexity issues and conflicts of interest are effectively addressed across all sectors and all regulated entities of a financial conglomerate. In the same vein, as regards supplementary supervision of internal control mechanisms and risk management processes (10), Directive 2002/87/EC should require consistency of the supplementary supervision with the monitoring by the competent authorities of compliance with prudential rules established under the UCITS Directive (11). Such consistency is already required between the supplementary supervision and supervisory practices under the relevant provisions of the Banking Directive (12) and the Solvency II Directive (13).

Reporting formats

4. The ECB recommends (14) applying harmonised formats, frequencies and dates of reporting, on the basis of implementing technical standards developed by the relevant ESA, through the Joint Committee (15), for the reporting of the capital adequacy requirements calculated for the relevant entities of a financial conglomerate (16). Such harmonisation should follow the model already in place in the banking sector, on the basis of a 2009 amendment to the Banking Directive (17). The ECB understands that the work on harmonisation of reporting formats will continue, inter alia in connection with the needs generated by the implementation of the Basel III capital framework into Union law. The Eurosystem has a strong interest in this area based on its financial stability role and will follow the progress of this work in cooperation with the Commission.

Where the ECB recommends that the proposed directive is amended, a specific drafting proposal is set out in the Annex accompanied by explanatory text to this effect.

Done at Frankfurt am Main, 28 January 2011. The President of the ECB Jean-Claude TRICHET

(1) COM(2010) 433 final.

(2) Currently consisting 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 (OJ L 35, 11.2.2003, p. 1) and Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance and reinsurance undertakings in an insurance or reinsurance group (OJ L 330, 5.12.1998, p. 1).

(3) See amendments to Article 1 and Articles 2(2), 3(1), 4(2) and 10(2) and in Annexes I and II to Directive 98/78/EC introduced by Article 1 and Annex I of the proposed directive; see amendments to Articles 4, 71, 72, 84, 105, 125 to 127, 129 and 141 to 143 of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) (OJ L 177, 30.6.2006, p. 1), introduced by Article 3 of the proposed directive.

(4) See proposed amendment 3 in the Annex to this opinion.

(5) See Articles 2(5) and 3(2), third subparagraph, of Directive 2002/87/EC, as introduced by Article 2(1) and (2) of the proposed directive.

(6) See proposed amendment 1 in the Annex to this opinion.

(7) See proposed amendment 2 in the Annex to this opinion.

(8) See Articles 3(8), 7(5), 8(5), 9(6) and 11(5) of Directive 2002/87/EC, as introduced by Articles 2(2) and (4) to (7) of the proposed directive.

(9) Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority) (OJ L 331, 15.12.2010, p. 120).

(10) See Article 9 of Directive 2002/87/EC.

(11) Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32). Supervisory monitoring of asset management companies is referred to in Article 21(1) and Article 102(4)(a) of the UCITS Directive; it focuses on ensuring compliance with: (i) prudential rules required to be introduced by Article 12 with respect to asset management companies, and (ii) further rules set by Articles 17 and 18 with respect to offering of asset management services through branches and the provision of cross-border services.

(12) Directive 2006/48/EC.

(13) Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (recast) (OJ L 335, 17.12.2009, p. 1).

(14) See proposed amendments 4 and 6 in the Annex to this opinion.

(15) See Article 21a(2) of Directive 2002/87/EC, as introduced by Article 2(15) of Directive 2010/78/EU.

(16) See Article 6(2) of Directive 2002/87/EC.

(17) See Article 74(2), second subparagraph of Directive 2006/48/EC, as introduced by Article 1(14) of Directive 2009/111/EC of the European Parliament and of the Council of 16 September 2009 amending Directives 2006/48/EC, 2006/49/EC and 2007/64/EC as regards banks affiliated to central institutions, certain own funds items, large exposures, supervisory arrangements, and crisis management (OJ L 302, 17.11.2009, p. 97).