*** * * * * * * *** COMMiSSION OF THE EUROPEAN COMMUNITIES 
Proposal for a Brussels, 15.12.1997 
COM(97) 706 final 
97 /0357 (COD) 
EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE 
relating to the taking up and pursuit of the business of credit institutions 
(codified version) 
(presented by the Commission) 

EXPLANATORY MEMORANDUM 
1. In the context of a people's Europe, the Commission attaches great importance to simplifying and clarifying Community law so as 
to make it clearer and more accessible to the ordinary citizen, thus giving him new opportunities and the chance to make use of the 
specific rights it gives him.· 
This aim cannot be achieved so long as nwnerous provisions that have been amended several times, often quite substantially, 
remain scattered, so that they must be sought partly in the original instrument and partly in later amending ones. Considerable 
research work, comparing many different instruments, is thus needed to identify the current rules. 
For this reason a codification of rules that have frequently been amended is _also essential if Community law is to be clear and 
transparent. 
2. On I April 1987 the Commission therefore decided to instruct its staff that all legislative measures should be codified after no 
more than ten amendments, stressing that this was a minimwn requirement and that departments should endeavour to codify at 
even shorter intervals the texts for which they were responsible, to ensure that the Community rules were clear and readily 
understandable. 
3. The Conclusions of the Presidency of the Edinburgh European Council (December 1992) confirmed this, stressing the importance 
of legislative codification as it offers certainty as to the law applicable to a given matter at a given time. 
It must be undertaken in full compli~ce with the normal Community legislative procedure. 
Given that no changes of substance may be made to the instruments affected by legislative codification, Parliament, the Council 
and the Commission have agreed, by an interinstitutional agreement dated 20 December 1994, that an accelerated procedure may 
be used for the fast-track adoption of codification instruments. 
4. The purpose of this proposal< 1) for legislative codification of Council Directives 73/183/EEC of 28 June 1973, on the abolition of 
restrictions on freedom of establishment and freedom to provide services in respect of self-employed activities of banks and other 
financial institutions; 77/780/EEC of 12 December 1977, on the coordination of laws, regulations and administrative provisions 
relating to the taking up and pursuit of the business of credit institutions; 89/299/EEC of 17 April 1989, on the own funds of credit 
institutions; 89/646/EEC of 15 December 1989, on the coordination of laws, regulations and administrative provisions relating to 
the taking up and pursuit of business of credit institutions and amending Directive 77/780/EEC; 89/647/EEC of 18 December 
1989, on the solvency ratio for credit institutions; 92/30/EEC of 6 April 1992, on the supervision of credit institutions on a 
consolidated basis; 92/121/EEC of 21 December 1992, on the monitoring and control of large exposures of credit institutions, is to 
undertake official codification of this type. The new directive will supersede the various directives incorporated in it(2), their 
content is fully preserved, and they are brought together with only such formal amendments as are required by the codification 
exercise itself. 
4a In order to point out the satisfactory application of the codification of the Directive mentioned above, in so far as it is a purely 
formal procedure, the term 'Contact Committee' appearing in Recital No. 21 of Directive 89/646/EEC and Recital No. 15 of 
Directive 77/780/EEC (Recitals No. 23 and 66 respectively, in this consolidated version), is replaced by the term 'Contact Group'. 
In effect, contrary to the terminology that was mistakenly applied in the relevant Recitals of the above mentioned Directives, the 
term 'Contact Group' was used from the beginning of the latter activities. 
5. This legislative codification proposal was dra,\n up on the basis of the texts of the acts published in the Official Journal, in all the 
official languages. Although the articles have been given new numbers, the old nwnbering has been retained in the margin for ease 
of reference; the correlation between the old and new numbers is sho,vn in a table set out in Annex VI, to the codified Directive. 
( 1) Entered in the legislative programme for 1994 
(2) Sec Annex V, Part A of this Proposal. 
2 
Proposal for a 
EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE / .. ./ .. ./EC 
of ..... . 
relating to the taking up and pursuit of the business of credit 
institutions 
THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE 
EUROPEAN UNION, 
Having regard to che Treaty establishing the European Community, and in 
pa11icular the first and third sentences of Article 57 (2) thereof, 
Having regard to the proposal from the Commission; 
Having regard to the opinion of the Economic and Social Committee ( 1 ); 
Acting in accordance with the procedure laid down in Article 189b of the 
Treaty (2); 
(1) Whereas Council Directive 73/183/EEC of 28 June 1973 on the 
abolition of restrictions on freedom of establishment and freedom to 
provide services in respect of self-employed activities of banks and 
other financial institutions (3), Council Directive 77/780/EEC of 12 
December 1977 on the coordination of laws, regulations and 
administrative provisions relating to the taking up and pursuit of the 
business of credit institutions (4), Council Directive 89/299/EEC of 
17 April 1989 on the own funds of credit institutions (5), Council 
Directive 89/646/EEC of 15 December I 989 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 (6), Council Directive 89/647/EEC of 18 
December 1989 on a solvency ratio for credit institutions (7), 
Council Directive 92/30/EEC of 6 April 1992 on the supervision of 
credit institutions on a consolidated basis (8), and Council Directive 
92/121 /EEC of 21 December 1992 on the monitoring and control of 
large exposures of credit institutions (9) have been frequently and 
substantially amended; whereas, for reasons of clarity and 
rationality, the said Directives therefore, should be codified and 
combined in a single text; 
(1) 
(2) . 
(3) 
(4) 
(5) 
(6) 
(7) 
(8) 
(9) OJNoC 
OJ No L 194, 16.7.1973; p. I. 
OJ No L 322, 17. 12. 1977, p. 30; Directive as last amended by Directive 96/13/EC (OJ No L 66, 16. 3. 1996, p. 15). 
OJ No L 124, 5. 5. 1989, p. 16; Directive as last amended by Directive 92/30/EEC (OJ No L 110, 28. 4. 1992, p. 52). 
OJ No L 386, 30. 12. 1989, p. 1; Directive as last amended by European Parliament and Council Directive 95/26/EC (OJ No L I 68, I 8. 7. I 995, 
p. 7). 
OJ No L 386, 30. 12. 1989, p. 14; Directive as last amended by Directive 96/10/EC (OJ No L 85, 3. 4. I 996, p. 17). 
OJ No L l lO, 28.4.1992, p. 52. 
OJ No L 29, 5. 2. 1993, p. I; Directive as amended by the Act of Accession of Austria, Finland and Sweden. 
3 
(2) Whereas, pursuant to the Treaty, any discrirninatory treatment with 
regard to establishment and to the provision of services, based either 
on nationality or on the fact that an undertaking is not established in 
the Member State where the services are provided, is prohibited; 
(3) Whereas, in order to make it easier to take up and pursue the 
business of credit institutions, it is necessary to eliminate the most 
obstructive differences between the laws of the Member States as 
regards the rules to which these institutions are subject; 
(4) Whereas this Directive constitute~ the essential instrument for the 
achievement of the internal market, a course determined by the 
Single European Act and set out in timetable form in the 
Commission's White Paper, from the point of view of both the 
freedom of establishment and the freedom to provide services, in the 
field of credit institutions; 
(5) Whereas measures to coordinate credit institutions must, both in 
order to protect savings and to create equal conditions of 
competition between these institutions, apply to all of them; 
whereas due regard must be had, where applicable, to the objective 
differences in their statutes and their proper aims as laid down by 
national laws; 
4 I. 77/780/EEC 
(adapted) 
2. 77/780/EEC 
1. 89/646/EEC 
(adapted) 
4. 771780/EEC 
(6) Whereas the scope of those measures should therefore be as broad 
as possible, covering all institutions whose business is to receive 
repayable funds from the public, whether in the form of deposits or 
in other forms such as the continuing issue of bonds and other 
comparable securities and to grant credits for their own account; 
whereas exceptions must be provided for in the case of certain credit" 
institutions to which this Directive cannot apply; whereas the 
provisions of this Directive shall not prejudice the application of 
national laws which provide for special supplementary 
authorizations permitting credit institutions to carry on specific 
activities or undertake specific kinds of operations; 
(7) Whereas the approach which has been adopted is to achieve only the 
essential harmonization necessary and sufficient to secure the 
mutual recognition of authorization and of prudential supervision 
systems, making possible the granting of a single licence recognized 
throughout the Community and the application of the principle of 
home Member State prudential supervision; whereas, therefore, the 
requirement that a programme of operations must be produced 
should therefore be seen merely as a factor enabling the competent 
authorities to decide on the basis of more precise information using 
objective criteria; whereas a measure of flexibility may nonetheless 
be possible as regards the requirements on the legal form of credit 
institutions and the protection of banking names; 
(8) Whereas equivalent financial requirements for credit institutions are 
necessary to ensure similar safeguards for savers and fair conditions 
of competition between comparable groups of credit institutions; 
whereas, pending further coordination, appropriate structural ratios 
should be formulated that will make it possible within the 
frame\vork of cooperation between national authorities to observe, 
in accordance with standard methods, the position of comparable 
types of credit institutions; whereas this procedure should help to 
bring about the gradual approximation of the systems of coefficients 
established and applied by the Member States; \.\1hereas it is 
necessary, however, to make a distinction between coefficients 
intended to ensure the sound management of credit institutions and 
those established for the purposes of economic and monetary policy; 
5 5. 77/780/EEC 
(adapted) 
+ 
6. 
4. 89/646/EEC 
+ 
9. 77/780/EEC 
(adapted) 
+ 
11. (adapted) 
12. 771780/EEC 
(adapted) 
(9) Whereas the principles of mutual recognition and home Member 8. 89/646/EEC 
State supervision require that Member States' competent authorities (adapted) 
should not grant or should withdraw ·authorization where factors 
such as content of the activities programmes, the geographical + 
distribution or the activities actually_ carried on indicate clearly that 
a credit institution has opted for t~e legal system of one Member 
State for the purpose of evading the stricter standards in force in 
another Member State within whose territory it carries on or intends 
to carry on the greater part of its_ activities; whereas a credit 7. 95/26/EC 
institution which is a legal person must be authorized in the Member (adapted) 
State in which it has its registered office; whereas a credit institution 
which is not a legal person must have its head office in the Member 
State in which it has been authorized; whereas, in addition, Member 
States must require that a credit institution's head office always be 
situated in its home Member State and that it actually operates there; 
(10) Whereas the competent authorities should not authorize or continue 3. 95/26/EC 
the authorization of a credit institution. where they are liable to be (adapted) 
prevented from effectively exercising their supervisory functions by 
the close links between that ins~itution and other natural or Jega] + 
persons; whereas credit institutions. already authorized must also 
satisfy the competent authorities in that respect; whereas the 4. 
definition of 'close links' in this Directive lays down minimum 
criteria and that does not prevent Member States from applying it to + 
situations other than those envisaged by the definition; whereas the s. (adapted) 
sole fact of having acquired a significant proportion of a company's 
capital does not constitute participation, within the meaning of 
'close links', if that holding has been acquired solely as a temporary 
investment which does not make it possible to exercise influence 
over the structure or financial policy of the institution; 
( 11) Whereas the reference to the supervisory authorities' effective 6. 95/26/EC 
exercise of their supervisory functions covers supervision on a 
consolidated basis which must be exercised over a credit institution 
where the provisions of Community law so provide; whereas, in 
such cases, the authorities applied to for authorization must be able 
to identify the authorities competent to exercise supervision on a 
consolidated basis over that credit institution; 
(12) Whereas the home Member State may also establish rules stricter 9. 89/646/EEC 
than those laid down in Article 5 (1 ), first subparagraph and (2), and (adapted) 
Articles 7, 16, 30, 5 l and 65 for institutions authorized by its 
competent authorities; 
6 
( I 3) Whereas the abolition of the authorization requirement with respect 
to the branches of Community credit institutions necessitates the 
abolition of endowment capital; 
( 14) Whereas, by virtue of mutual recogmt1on, the approach chosen 
permits credit institutions authorized in their home Member States 
to carry on, throughout the Community, any or all of the activities 
listed in Annex I by establishing branches or by providing services; 
whereas the carrying-on of activities not listed in the said Annex 
enjoys the right of establishment and the freedom to provide 
services under the general provisions of the Treaty; 
(15) Whereas it is appropriate, however, to extend mutual recognition to 
the activities listed in Annex I when they are carried on by financial 
institutions which are subsidiaries of credit institutions, provided 
that such subsidiaries are covered by the consolidated supervision of 
their parent undertakings and meet certain strict conditions; 
( 16) Whereas the host Member State may, in connection with the 
exercise of the right of establishment and the freedom to provide 
services, require compliance with specific provisions of its own 
national laws or regulations on the part of institutions not authorized 
as credit institutions in their home Member States and with regard to 
activities not listed in Annex I provided that, on the one hand, such 
provisions are compatible with Community law and are intended to 
protect the general good and that, on the other hand, such 
institutions or such activities are not subject to equivalent rules 
under the legislation or regulations of their home Member States; 
( 17) Whereas the Member States must ensure that there are no obstacles 
to carrying on activities receiving mutual recognition in the same 
manner as in the home Member State, as long as the latter ao not 
conflict with legal provisions protecting the general good in the host 
Member State; 
( 18) Whereas there is a necessary link between the objective of this 
Directive and the liberalization of capital movements being brought 
about by other Community legislation; whereas in any case the 
measures regarding the liberalization of banking services must be in 
harmony with the-measures liberalizing capital movements; 
7 17. 89/646/EEC 
(adapted) 
12. 89/646/EEC 
(adapted) 
+ 
13. 
14. 89/646/EEC 
(adapted) 
15. 89/646/EEC 
16. 89/646/EEC 
18. 89/646/EEC 
(adapted) 
(19) Whereas the rules governing branches of credit institutions having 
their head office outside the Communit-y should be analogous in all 
Member States; whereas it is important at the present time to 
provide that such rules may not be more favourable than those for 
branches · of institutions from another Member State; whereas it 
should be specified that the Community may conclude agreements 
with third countries providing for the application of rules which 
accord such branches the same treatment throughout its territory, 
account being taken of the principle of reciprocity; whereas the 
branches of credit institutions authorized in third countries do not 
enjoy the freedom to provide services under the second paragraph of 
Article 59 of the Treaty or the freedom of establishment in Member 
States other than those in which they are established; whereas, 
however, requests for the authorization of subsidiaries or of the 
acquisition of holdings made by undertakings governed by the laws 
of third countries are subject to a procedure intended to ensure that 
Community credit institutions receive reciprocal treatment in the 
third countries in question; 
(20) Whereas the authorizations granted to credit institutions by the 
competent national authorities pursuant to this Directive have 
Community-wide, and no longer merely nation-wide, application; 
whereas existing reciprocity clauses have therefore no effect; 
whereas a flexible procedure i~ therefore needed to make it possible 
to assess reciprocity on a Community basis; whereas the aim of this 
procedure is not to close the Community's financial markets but 
rather, as the Community intends to keep its financial markets open 
to the rest of the world, to improve the liberalization of the global 
financial markets in other third countries; whereas, to that end, this 
Directive provides for procedures for negotiating with third 
countries and, as a last resort, for the possibility of taking measures 
involving the suspension of new applications for authorization or 
the restriction of new authorizations; 
(21, Whereas it is desirable that agree~ent should be reached, on the 
basis of reciprocity, between the Community and third countries 
with a view to allowing the practical exercise of consolidated 
supervision over the largest possible geographical area; 
(22) Whereas responsibility for supervising the financial soundness of a 
credit institution, and in particular its solvency, rests with the 
competent authorities of its home Member State; whereas the host 
Member State's competent authorities retain responsibility for the 
supervision of liquidity and monetary policy; whereas the 
supervision of market risk must be the subject of close cooperation 
between the competent authorities of the home and host Member 
States; 
8 13. 77/780/EEC 
+ 
19. 89/646/EEC 
(adapted) 
20. 89/646/EEC 
(adapted) 
12. 92/30/EEC 
10. 89/646/EEC 
(adapted) 
(23) Whereas the smooth operation of the internal banking market 
requires not only legal rules but also close and regular cooperation 
between the competent authorities of the Member States; whereas 
for the consideration of problems concerning individual credit 
institutions the Contact Group set up between the banking 
supervisory authorities remains the most appropriate forum; 
whereas that Group is a suitable body for the mutual exchange of 
information provided for in Article 28; 
(24) Whereas that mutual information procedure does not in any case 
replace the bilateral collaboration established by Article 28; whereas 
the competent host Member State authorities can, without prejudice 
to their powers of proper control, continue either, in an emergency, 
on their own initiative or following the initiative of the competent 
home Member State authorities, to verify that the activities of a 
credit institution established within their territories comply with the 
relevant laws and with the principles of sound administrative and 
accounting procedures and adequate internal control; 
(25) Whereas it is appropriate to allow the exchange of information 
between the competent authorities and authorities or bodies which, 
by virtue of their function, help to strengthen the stability of the 
financial system; whereas, in order to preserve the confidential 
nature of the information forwarded, the list of addressees must 
remain within strict limits; 
(26) Whereas certain behaviour, such as fraud and insider offences, are 
liable to affect the stability, including the integrity, of the financial 
system, even when involving institutions other than credit 
institutions; 
(27) Whereas it is necessary to specify the conditions under whicr. such 
exchanges of information are authorized; 
(28) Whereas, where it is stipulated that information may be disclosed 
only with the express agreement of the competent authorities, these 
may, where appropriate, make their agreement subject to 
compliance with strict conditions; 
9 21. 89/646/EEC 
(adapted) 
22. 89/646/EEC 
(adapted) 
8. 95/26/EC 
(adapted) 
9. 95/26/EC 
(adapted) 
10. 95/26/EC 
11. 95/26/EC 
(29) Whereas exchanges of information between, on the one hand, the 
competent authorities and, on the other, central banks and other 
bodies with a similar function in their capacity as monetary 
authorities and, where appropriate, other public authorities 
responsible for supervising payment systems should also be 
authorized; 
(30) Whereas for the purpose of strengthening the prudential supervision 
of credit institutions and protection of clients of credit institutions, it 
should be stipulated that an auditor must have a duty to report 
promptly to the competent authorities, wherever, as provided for by 
this Directive, he becomes aware, while carrying out his tasks, of 
certain facts which are liable to have a serious effect on the financial 
situation or the administrative and accounting· organization of a 
credit institution; whereas, having regard to the aim in view, it is 
desirable for the Member State to provide that such a duty should 
apply in all circumstances where such facts are discovered by an 
auditor during the performance of his tasks in an undertaking which 
has close links with a credit institution; whereas the duty of 
auditors to communicate, where appropriate, to the competent 
authorities certain facts and decisions concerning a credit institution 
which they discover during the performance of their tasks in a non­
financial undertaking does not in itself change the nature of their 
tasks in that undertaking nor the manner in which they must 
perform those tasks in that undertaking; 
(31) Whereas common basic standards for the own funds of credit 
institutions are a key factor in the creation of an internal banking 
market since own funds serve to ensure the continuity of credit 
institutions and to protect savings; whereas such harmonization 
strengthens the supervision of credit institutions and contributes to 
further coordination in the banking sector; 
(32) Whereas such standards must apply to all credit institutions 
authorized in the Community; 
(33) Whereas the own funds of a credit institution can serve to absorb 
losses which are not matched by a sufficient volume of profits; 
whereas the own funds also serve as an important yardstick for the 
competent authorities, in particular for the assessment of the 
solvency of credit institutions and for other prudential purposes; 
10 12. 95/26/EC 
15. 95/26/EC 
(adapted) 
+ 
16. (adapted) 
+ 
17. (adapted) 
I . 89/299/EEC 
(adapted) 
2. 89/299/EEC 
3. 89/299/EEC 
(34) Whereas credit institutions, in an internal banking market, engage in 
direct competition with each other, and the definitions and standards 
pertai_ning to own funds must therefore be equivalent; whereas, to 
that end, the criteria for determining the composition of own funds 
must not be left solely to Member States; whereas the adop.tion of 
common basic standards will be in the best interests of the 
Community in that it will prevent distortions of competition and 
will strengthen the Community banking system; 
(35) Whereas the definition of own funds laid down in this Directive 
provides for a maximum of items and qualifying amounts, leaving it 
to the discretion of each Member State to use all or some of such 
items or to adopt lower ceilings for the qualifying amounts; 
(36) Whereas this Directive specifies the qualifying criteria for certain 
own funds items, and the Member States remain free to apply more 
stringent provisions; 
(3 7) Whereas at the initial stage common basic standards are defined in 
broad terms in order to encompass all the items making up own 
funds in the different Member States; 
(38) Whereas, according to the nature of the items making up own funds, 
this Directive distinguishes between on the one hand, items 
constituting original own funds and, on the other, those constituting 
additional own funds; 
(39) Whereas, to reflect the fact that items constituting additional own 
funds are not of the same nature as those constituting original own 
funds, the amount of the former included in own funds must not 
exceed the original own funds; whereas, moreover, the amount of 
certain items of additional own funds included must not exceed one­
half of the original own funds; 
(40) Whereas, in order to avoid distortions of competition, public credit 
institutions must not include in their own funds guarantees granted 
them by the Member States or local authorities; 
I I 4. 89/299/EEC 
(adapted) 
5. 89/299/EEC 
6. 89/299/EEC 
7. 89/299/EEC 
8. 89/299/EEC 
I 0. 89/299/EEC 
· 11. 89/299/EEC 
(adapted) 
( 41) Whereas whenever in the course of supervision it is necessary to 
determine the amount of the consolidated own funds of a group of 
credit institutions, that calculation shall be effected in accordance 
with this Directive; 
( 42) Whereas the precise accounting technique to be used for the 
calculation of own funds, the solvency ratio, and for the assessment 
of the concentration of exposures must take account of the 
provisions of Council Directive 86/635/EEC of 8 December 1986 
on the annual accounts and consolidated accounts of banks and 
other financial institutions (1) ~ which incorporates certain 
adaptations of the provisions of Council Directive 83/349/EEC of 
13 June 1983 based on Article 54 (3) (g) of the Treaty on 
consolidated acco.unts (2); 
(43) Whereas the prov1s1ons on own funds form part of the wider 
international effort to bring about approximation of the rules in 
force in major countries regarding the adequacy of own funds; 
( 44) Whereas the Commission will draw up a report and periodically 
examine, with the aim of tightening them, the provisions on own 
funds and thus achieving greater convergence on a common 
definition of own funds; whereas such convergence will allow the 
alignment of Community credit institutions' own funds; 
( 45) Whereas the provisions on solvency ratios are the outcome of work 
carried out by the Banking Advisory Committee which is 
responsible for making suggestions to the Commission with a view 
to coordinating the coefficients applicable in the Member States; 
( 46) Whereas the establishment of an appropriate solvency ratio plays a 
central role in the supervision of credit institutions; 
(47) Whereas a ratio which weights assets and off-balance-sheet items 
according to the degree of credit risk is a particularly useful measure 
of solvency; 
( 48) Whereas the development of common standards for own funds in 
relation to assets and off-balance-sheet items exposed to credit risk 
is, accordingly, an essential aspect of the harmonization necessary 
for the achievement of the mutual recognition of supervisio11 
techniques and thus the completion of the internal banking market; 
./ 12. 89/299/EEC 
(adapted) 
13. 89/299/EEC 
(adapted) 
+ 
12. 89/647/EEC 
(adapted) 
+ 
7. 92/121/EEC 
(adapted) 
14. 89/299/EEC 
(adapted) 
16. 89/299/EEC 
(adapted) 
1. 89/647/EEC 
(adapted) 
2. 89/647/EEC 
3. 89/647/EEC 
4. 89/647/EEC 
(I) OJ No L 372, 31.12.1986, p. I. 
(2) OJ No L 193. I 8. 7. 1983, p. I; Directive as last amended by Directive 90/605/EEC (OJ No L 317, 16. 11. 1990, p. 60). 
12 
(49) Whereas, in that respect, the provisions on a solvency ratio must be 
considered in conjunction with other specific instruments also 
harmonizing the fundamental techniques of the supervision of credit 
institutions; 
(50) Whereas, in an internal banking market, institutions are required to 
enter into direct competition with one another and whereas the 
common solvency standards in the form of a minimum ratio prevent 
distortions of competition and strengthen the Community banking 
system; 
(51) Whereas this Directive provides for different weightings to be given 
to guarantees issued by different financial institutions; whereas the 
Commission accordingly undertakes to examine whether this 
Directive taken as a whole significantly distorts competition 
between credit institutions and insurance undertakings and, in the 
light of that examination, to consider whether any remedial 
measures are justified; 
(52) Whereas Annex III lays down the treatment of off-balance-sheet 
items concerning interest and foreign-exchange rates in the context 
of the calculation of credit institutions' capital requirements; 
whereas with a view to the smooth functioning of the internal 
market and in particular with a view to ensuring a level playing field 
Member States are obliged to strive for uniform assessment of 
contractual netting agreements by their competent authorities; 
whereas Annex III takes account of the work of an international 
forum of banking supervisors on the supervisory recognition of 
bilateral netting, in particular the possibility of calculating the own­
funds requirements for certain transactions on the basis of a net 
rather than a gross amount provided that there are legally binding 
agreements which ensure that the credit risk is confined to the net 
amount; whereas the rules contemplated for the supervisory 
recognition of netting at a wider international level will lead to the 
possibility of reducing the capital requirements for internationally 
active credit institutions and groups of credit institutions in a wide 
range of non-member countries' credit institutions which compete 
with Community credit institutions; whereas for credit institutions 
incorporated in the Member States, Annex III creates a similar 
possibility for the recognition of bilateral netting by the competent 
authorities and thereby offers them equal conditions of competition; 
whereas the rules are both well balanced and appropriate for the 
further reinforcement of the application of prudential supervisory 
measures to credit institutions; whereas the competent authorities in 
the Member States should ensure that the calculation of add-ons is 
based on effective rather than apparent notional amounts; 
13 5. 89/647/EEC 
(adapted) 
7. 89/647/EEC 
(adapted) 
8. 89/647/EEC 
(adapted) 
I. 96/10/EC 
+ (adapted) 
2. 
+ 
3. 
+ 
4. 
+ 
5. 
+ 
6. 
(53) Whereas the minimum ratio provided for in this Directive reinforces 
the capital of credit institutions in the Community; whereas a level 
of 8 % has been adopted following a· statistical survey of capital 
requirements in force at the beginning of 1988; 
(54) Whereas the essential rules for monitoring large exposures of credit 
institutions should be harmonized; whereas Member States should 
still be able to adopt provisions more stringent than those provided 
for by this Directive; 
(55) Whereas the monitoring and control of a credit institution's 
exposures is an integral parf of its supervision; whereas an excessive 
concentration of exposures to a single client or group of connected 
clients may result in an unacceptable risk of loss; whereas such a 
situation may be considered prejudicial to the solvency of a credit 
institution; 
(56) Whereas, in an internal banking market, credit institutions are 
engaged in direct competition with one another and monitoring 
requirements throughout the Community should therefore be 
equivalent; whereas, to that end, the _criteria applied to determining 
the concentration of exposures must be the · subject of legally 
binding rules at Community level and cannot be left entirely to the 
discretion of the Member States; whereas the adoption of common 
rules will therefore best serve the Community's interests, since it 
will prevent differences in the conditions of competition, while 
strengthening the Community's banking system; 
(57) Whereas the provisions on a solvency ratio for credit institutions 
include a list of credit risks which may be incurred by credit 
institutions; whereas that list should therefore be used also for the 
definition of exposures for the purposes of limits to large exposures; 
whereas it is not, however, appropriate to refer on principle to the 
weightings or degrees of risk laid down in the said provisions; 
whereas those weightings and degrees of risk were devised for the 
purpose of establishing a general solvency requirement to cover the 
credit risk of credit institutions; whereas, in the context of the 
regulation of large exposures, the aim is to limit the maximum loss 
that a credit institution may incur through any single client or group 
of connected clients; whereas it is therefore appropriate to adopt a 
prudent approach in which, as a general rule, accoun~ is taken of the 
nominal value of exposures, but no weightings or degrees of risk are 
applied; 
14 9. 89/647/EEC 
2. 92/121/EEC 
4. 92/121/EEC 
6. 92/121/EEC 
(adapted) 
8. 92/121/EEC 
(adapted) 
(58) Whereas, when a credit institution incurs an exposure to its own 
parent undertaking or to other subsidiaries of its parent undertaking, 
particular prudence is necessary; whereas the management of 
exposures incurred by credit institutions must be carried out in a 
fully autonomous manner, in accordance with the principles of 
sound banking management, without regard to any considerations 
other than those principles; whereas the provisions of this Directive 
require that where the· influence exercised by persons directly or 
indirectly holding a qualifying participation in a credit institution is 
likely to operate to the detriment of the sound and prudent 
management of that institution, the competent authorities shall take 
appropriate measures to put an end to that situation; whereas, in the 
field of large exposures, specific standards should also be laid down 
for exposures incurred by a credit institution to its own group, and 
in such cases more stringent restrictions are justified than for other 
exposures; whereas more stringent restrictions need not, however, 
be applied where the parent undertaking is a financial holding 
company or a credit institution or where the other subsidiaries are 
either credit or financial institutions or undertakings offering 
ancillary banking services, provided that all such undertakings are 
covered by the supervision of the credit institution on a consolidated 
basis; whereas in such cases the consolidated monitoring of the 
group of undertakings allows for an adequate level of supervision, 
and does not require the imposition of more stringent limits on 
exposure; whereas under this approach banking groups will also be 
encouraged to organize their structures in such a way as to allow 
consolidated monitoring, which is desirable because a more 
comprehensive level of monitoring is possible; 
(59) Whereas, in order to be effective, supervision on a consolidated 
basis must be applied to all banking groups, including those the 
parent undertakings of which are not credit institutions; where .. s the 
competent authorities must hold the necessary legal instruments to 
be able to exercise such supervision; 
(60) Whereas, in the case of groups with diversified activities the parent 
undertakings of which control at least one credit institution 
subsidiary, the competent authorities must be able to assess the 
financial situation of a credit institution in such a group; whereas, 
pending subsequent coordination, the Member States may lay down 
appropriate methods of consolidation for the achievement of the 
objective of this Directive; whereas the competent authorities must 
at least have the means of obtaining from all undertakings within a 
group the information necessary for the performance of their 
function; whereas cooperation between the authorities responsible 
for the supervision o( different financial sectors must be established 
in the case of groups of undertakings carrying on a range of 
financial activities; 
15 9. 92/121/EEC 
(adapted) 
2. 92/30/EEC 
3. 92/30/EEC 
(61) Whereas the Member States can, furthermore, refuse or withdraw 
banking authorization in the case of certain group structures 
considered inappropriate for carrying on banking activities, in 
particular because such structures · could not be supervised 
effectively, whereas in this respect the competent authorities have 
the powers mentioned in the first subparagraph of Article 7 (1), 
Article 7 (2), point ( c) of Article. 14 (I), and Article 16 of this 
Directive, in order to ensure the sound and prudent management of 
credit institutions; 
( 62) Whereas the Member States can equally apply appropriate 
supervision techniques to groups with structures not covered by this 
Directive; whereas, if such structures become common, this 
Directive should be extended to cover them; 
(63) Whereas supervision on a consolidated basis must take in all 
activities defined in Annex I; whereas all undertakings principally 
engaged in such activities must therefore be included in supervision 
on a consolidated basis; whereas, as a result, the definition of 
financial institutions must ~ widened in order to cover such 
activities; 
(64) Whereas Directive 86/635/EEC, together with Directive 
83/349/EEC, established the rules of consolidation. applicable to 
consolidated accounts published by credit institutions; whereas it is 
therefore possible to define more precisely the methods to be used 
in prudential supervision exercised on a consolidated basis; 
(65) Whereas supervision of credit institutions on a consolidated basis 
must be aimed at, in particular, protecting the interests of the 
depositors of the said institutions and ensuring the stability of the 
financial system; 
(66) Whereas the examination of problems connected with matters 
covered by this Directive as well as by other Directives on the 
business of credit institutions requires cooperation between the 
competent authorities and the Commission within a Banking 
Advisory Committee, particularly when conducted with a view to 
closer coordination; whereas the Banking Advisory Committee of 
the competent authorities of the Member States does not rule out 
other forms of cooperation between authorities which supervise the 
taking up and pursuit of the business of credit institutions and, in 
particular, cooperation within the Contact Group set up between 
the banking supervisory authorities, 
16 5. 92/30/EEC 
(adapted) 
6. 92/30/EEC 
7. 92/30/EEC 
(adapted) 
9. 92/30/EEC 
(adapted) 
11. 92/30/EEC 
(adapted) 
14. 77/780/EEC 
(adapted) 
+ 
15. (adapted) 
(67) Whereas technical modifications to the detailed rules laid down in 
this Directive may from time to time be necessary to take account of 
new developments in the banking sector; whereas the Commission 
shall accordingly make such modifications as are necessary, after 
consulting the Banking Advisory Committee, within the limits of 
the:· implementing powers conferred on the Commission by the 
Treaty; whereas that Committee shall act as a 'Regulatory 
Committee', according to the rules of procedure laid down in 
Article 2 (Procedure III, Variant (b)) of Council Decision 
87/373/EEC of 13 July 1987 laying down the procedures for the 
exercise of implementing powers conferred on the Commission ( 1 ); 
(68) Whereas Article 36 (I) of this Directive pennits joint and several 
commitments of borrowers in the case of credit institutions 
organized as cooperative societies or funds to be treated as own 
funds items under Article 34 (2), point 7; whereas the Danish 
Government has expressed a strong interest in having its few 
mortgage credit institutions organized as cooperative societies or 
funds converted into public limited liability companies; whereas, in 
order to facilitate the conversion or to make it possible, a temporary 
derogation allowing them to include part of their joint commitments 
as own funds is required; whereas this temporary derogation should 
not adversely affect competition between credit institutions; 
(69) Whereas the application of a 20 % weighting to credit institutions' 
holdings of mortgage bonds may unsettle a national financial market 
on which such instruments play a preponderant role; whereas, in this 
case, provisional measures are taken to apply a I O % risk weighting; 
(70) Whereas, in order to ensure hannonious application of the 
provisions on ·large exposures, Member States should be allowed to 
provide for the two-stage application of the new limits; whereas, for 
smaller credit institutions, a longer transitional period ma~· be 
warranted inasmuch as too rapid an application of the 25 % rule 
could reduce their lending activity too abruptly; 
(71) Whereas, moreover, the hannonization of the conditions relating to 
the reorganization and winding-up of credit institutions is also 
proceeding; 
(72) Whereas the arrangements necessary for the supervision of the 
liquidity risks will also have to be harmonized; 
(73) Whereas this Directive must not affect the obligations of the 
Member States concerning the deadlines for transposition set out in 
Annex V, Part B, 
HA VE ADOPTED THIS DIRECTIVE: 
(l) OJ No L 197, 18.7.1987, p. 33. 
17 23. 89/646/EEC 
+ (adapted) 
14. 89/64 7 /EEC 
+ 
5. 92/16/EEC 
(adapted) 
+ 
12. 92/121/EEC 
(adapted) 
I. 92/16/EEC 
+ (adapted) 
2. (adap~ed) 
13. 89/647/EEC 
10. 92/121/EEC 
(adapted) 
6. 89/646/EEC 
7. 89/646/EEC 
(adapted) 
TITLE I 
Article 1 
Ar.:icle2 
Article 3 
TITLE II 
Article 4 
Article 5 
Article 6 
Article 7 
Article 8 
Article 9 
Article 10 
Article 11 
Article 12 
Article 13 
Article 14 
Article 15 
Article 16 
Article 17 
TITLE III 
Article 18 
Article 19 
Article 20 
Article 21 
Article 22 
TITLE IV 
Article 23 
Article 24 
Article 25 
TITLE V TABLE OF CONTENTS 
DEFINITIONS AND SCOPE ................................................................................................... 21 ·· 
Definitions ................................................................................................................................... 21 
Scope ........................................................................................................................................... 24 
Prohibition for undertakings other than credit institutions from carrying on 
the business of taking deposits or other repayable funds from the public .................................... 27 
REQUIREMENTS FOR AC<;ES~ TO THE TAKING-UP AND PURSUIT OF 
THE BUSINESS OF CREDIT INSTITUTIONS .................................................................... 27 
Authorization ............. l ................................................................................................................. 27 
Initial capital .................................. , ............................................................................................. 27 
Management body and place of the head office of credit institutions ......................................... 28 
Shareholders and members .......................................................................................................... 29 
Programme of operations and structural organization ................................................................. 29 
Economic needs ........................................................................................................................... 30 
Authorization refusal ................................................................................................................... 30 
Notification of the authorization to the Commission .................................................................. 30 
Prior consultation with the competent authorities ofother Member States ................................. 30 
Branches of credit institutions authorized in another Member State ........................................... 30 
Withdrawal of authorization ........................................................................................................ 31 
Name ........................................................................................................................................... 31 
Qualifying holding in a credit institution .................................................................................... 32 
· Procedures and internal control mechanisms ............................................................................... 33 
PROVISIONS CONCERNING THE FREEDOM OF ESTABLISHMENT 
AND THE FREEDOM TO PROVIDE SERVICES ................................................. 33 
Credit institutions ........................................................................................................................ 33 
Financial institutions ................................................................................................................... 34 
Exercise of the right of establishment ......................................................................................... 35 
Exercise of the freedom to provide services ................................................................................ 36 
Power of the competent authorities of the host Member State .................................................... 36 
RELATIONS WITH THIRD COUNTRIES ........................................................................... 38 
Notification of the subsidiaries of third countries' undertakings and conditions of 
access to the markets of these countries ...................................................................................... 3 8 
Branches of credit institutions having their head offices outside the Community ...................... 40 
Cooperation with third countries' competent authorities regarding supervision on 
a consolidated basis ..................................................................................................................... 40 
PRINCIPLES AND TECHNICAL INSTRUMENTS 
FOR PRUDENTIAL SUPERVISION ..................................................................................... 41 
Chapter 1 Principles of prudential supervision ............................................................................................ 41 
Article 26 
Article 27 
Article 28 
Article 29 
Article 30 
Article 31 
Article 32 
Article 33 Competence of control of the home Member State ............................................................. 41 · 
Competence of the host Member State ................................................................................ 41 
Collaboration concerning supervision ................................................................................. 42 
On the spot verification of branches established in another Member State ......................... 42 
Exchange of information and professional secrecy ............................................................. 43 
Duty of persons responsible for the legal control of annual and consolidated accounts ..... 4 7 
Power of sanction of the competent authorities ................................................................... 47 
Right to apply to the courts ................................................................................................. 48 
18 
Chapter 2 Technical instruments of prudential supen,ision .................................................................... 48 
Section 1 Own funds .............................................................................................................................. 48 
Article 34 General principles ........................................................................................................ 48 
Article 35 Other items ......... : ........................................................................................................ 50 
Article 36 Other provisions concerning own funds· ...................................................................... 51 
Article 3 7 Calculation ofown funds on a consolidated basis ....................................................... 52 
Article 38 Deductions and limits .................................................................................................. 53 
Article 39 Provision of proof to the competent authorities ........................................................... 53 
Section 2 Solvency ratio ......................................................................................................................... 53 
Article 40 General principles ........................................................................................................ 53 
Article 41 The numerator: own funds ........................................................................................... 54 
Article 42 The denominator: risk-adjusted assets and off-balance-sheets items ........................... 54 
Article 43 Risk weightings ........................................................................................................... 55 
Article 44 Weighting of claims for regional governments or local authorities of the _ 
Member States ............................................................................................................. 58 
Article 45 Other weighting ........................................................................................................... 59 
Article 46 Administrative bodies and non-commercial undertakings ......... ; ................................. 59 
Article 4 7 Solvency ratio level ..................................................................................................... 59 
Section 3 Large exposures ................................................................................................................. 60 
Article 48 Reporting of large exposures ....................................................................................... 60 
Article 49 Limits on large exposures ............................................................................................ 61 
Article 50 Supervision on a consolidated or unconsolidated basis of large exposures ................. 65 
Section 4 Qualifying holdings outside the financial sector ............................................................. 66 
Article 51 Limits to non-financial qualifying holdings ............................................................ 66 
Chapter 3 
Article 52 
Article 53 
Article 54 
Article 55 
Article 56 Supervision on a consolidated basis ................................................................................. 67 
Supervision on a consolidated basis of credit institutions ................................................... 67 
Competent authorities responsible for exercising supervision on a consolidated basis ....... 69 
Fom1 and extent of consolidation ........................................................................................ 70 
Information to be supplied by mixed-activity holding companies and their subsidiaries .... 71 
Measures to facilitate supervision on a consolidated basis .................................................. 72 
TITLE VI BANKING ADVISORY COMMITTEE ................................................................................. 73 
Article 57 Composition and tasks of the Banking Advisory Committee ...................................................... 73 
Article 58 Examination of the requirements for authorization ..................................................................... 74 
Article 59 Observation ratios ........................................................................................................................ 74. 
TITLE VII POWERS OF EXECUTION ................................................................ 75 
Article 60 Technical adaptations .................................................................................................................. 75 
19 
TITLE VIII TRANSITIONAL AND FINAL PROVISIONS ...................................................................... 76 
Chapter 1 Transitional provisions .......................................................................................... ~ ............ _ ...... 76 
Article 61 
Article 62 
Article 63 
Article 64 
Article 65 Transitional provisions regarding Article 36 ....................................................................... 76 
Transitional provisions regarding Article 43 ....................................................................... 77 
Transitional provisions regarding Article 47 ....................................................................... 78 
Transitional provisions regarding Article 49 ....................................................................... 78 
Transitional provisions regarding Article 51 ....................................................................... 80 
~ Chapter 2 Final provisions ......................................................................................................................... 80 
Article 66 Repealed Directives ........................................................................................................... 80 
Article 67 Imp-lementation .................................................................................................................. 80 
Article 68 Addressees ........................................................................................................................... 80 
ANNEX I List of activities subject to mutual recognition ....................................................................... 81 
ANNEX II Classification of off-balance-sheet items .................................................................................. 82 
ANNEX III The treatment of off-balance-sheet items concerning 
interest rates and foreign-exchange rates ................................................................................ 83 
ANNEX IV Types of off-balance-sheet items concerning 
interest rates and foreign-exchange rates ................................................................................ 86 
ANNEX V -Part A Repealed Directives ........................................................................................................... 87 
ANNEX V -Part B Deadlines for implementation .................. ~ ........................................................................ 88 
ANNEX VI Correlation Table ...................................................................................................................... 89 
20 
TITLE I 
DEFINITIONS AND SCOPE 
Article I 
Definitions 
For the purpose of this Directive: 
1. "Credit institution " shall mean an undertaking whose business is to 
receive deposits or other repayable funds from the public and to grant 
credits for its own account. 
For the purposes of applying the supervision on a consolidated 
basis, shall be considered as a credit institution, a credit institution 
according to the first paragraph and any private or public 
undertaking which corresponds to the definition in the first 
paragraph and which has been authorized in a third country. 
For the purposes of applying the supervision and control of large 
exposures, shall be considered as a credit institution, a credit 
institution according to the first paragraph, including branches of a 
credit institution in third countries and any private or public 
undertaking, including its branches, which corresponds to the 
definition in the first paragraph and w~ich has been authorized in a 
third country; 
1. "Authorization" shall mean an instrument issued in any form by the 
authorities by which the right to carry on the business of a credit 
institution is granted; 
3. "Branch" shall mean a place of business which forms a legally 
dependent part of a credit institution and which carries out directly all or 
some of the transactions inherent in the business of credit institutions; 
any number of places of business set up in the same Member State by a 
credit institution with headquarters in another Member State shall be 
regarded as a single branch; 
4. "Competent authorities" shall mean the national authorities which are 
empowered by law or regulation to supervise credit institutions; 
5. "Financial institution " shall mean an undertaking other than a credit 
institution, the principal activity of which is to acquire holdings or to 
carry on one or more of the activities listed in points 2 to 12 of Annex 
I; 
6. "Home Member State" shall mean the Member State in which a credit 
institution has been authorized in accordance with Articles 4 to 11; 
1. "Host Member State" shall mean the Member State in which a credit 
institution has a branch or in which it provides services; 
8. "Control" shall mean the relationship between a parent undertaking and 
a subsidiary, as defined in Article I of Directive 83/349/EEC, or a 
similar relationship between any natural or legal person and an 
undertaking; 
21 77/780/EEC 
Article 1, 1st indent 
-92/30/EEC 
Article 1, 1st indent 
(adapted) 
92/121/EEC 
Article 1 (a) 
(adapted) 
77/780/EEC 
Article 1, 2nd indent 
89/646/EEC 
Article 1 (3) 
89/646/EEC 
Article 1 (5) to (9) 
(as amended by 92/30/EEC, 
Article 10 (3)) 
9. •~Participation for tl,e purposes of supervision on a consolidated basis" 
shall mean the ownership, direct or indirect, of 20 % or more of the voting 
rights or capital of an undertaking; 
10. "Qualifying holding" shall mean a direct or indirect holding in an 
undertaking which represents 10 · % or more of the capital or of the 
voting rights or which makes it possible to exercise a significant 
influence over the management of the undertaking in which a holding 
subsists.___ · 
11. "Initial capital" shall mean capital as defined in Article 34 (2) points 1 
and2; __ _ 
12. "Parent undertaking" shall mean a parent undertaking as defined in 
Articles l and 2 of Directive 83/349/EEC. 
It shall, for the purposes of supervision on a consolidated basis and 
control of large exposures, mean a parent undertaking within the 
meaning of Article I (I) of Directive 83/349/EEC and any undertaking 
which, in the opinion of the competent authorities, effectively exercises 
a dominant influence over another undertaking; 
13. "Subsidiary" shall mean a subsidiary undertaking as defined in Articles 
I and 2 of Directive 83/349/EEC; 
It shall, for the purposts of supervision on a consolidated basis and 
control of large exposures, mean a subsidiary undertaking within the 
meaning of Article 1 (I) of Directive 83/349/EEC and any undertaking 
over which, in the opinion of the competent authorities, a parent 
undertaking effectively exercises a dominant influence. 
All subsidiaries of subsidiary undertakings shall also be consi_dered 
subsidiaries of the undertaking that is their original parent; 
14. '"Zone A" shall comprise all the Member States and all other countries 
which are full members of the Organization for Economic Cooperation 
and Development (OECD) and those countries which have concluded 
special lending arrangements with the International Monetary Fund 
(IMF) associated with the Fund's General Arrangements to Borrow 
(GAB). Any country which reschedules its external sovereign debt is, 
however, precluded from Zone A for a period of 5 years; 
15. "Zone B" shall comprise all countries not in Zone A; 
16. "Zone A credit institutions" shall mean all credit institutions authorized 
in the Member States, in accordance with Article 4, including their 
branches in third countries, and all private and public undertakings 
covered by the definition in point 1, first subparagraph and 
authorized in other Zone A countries, including their branches; 
11. "Zone B credit institutions" shall mean all private and public 
undertakings authorized outside Zone A covered by the definition in 
point 1, first subparagraph, including their branches within the 
Community; 
22 92/30/EEC 
Article 1, 6th indent 
(adapted) 
89/646/EEC 
Article 1 (10) to (12) 
92/30/EEC 
Article 1, 7th indent 
(adapted) 
92/121/EEC 
Article 1 (c) 
(adapted) 
189/646/EEC 
Article 1 (13) 
92/30/EEC 
Article 1, 8th indent 
(adapted) 
92/121/EEC 
Article 1 (d) 
(adapted) 
89/646/EEC 
Article 1 (13) 
92/30/EEC 
Article 1, 8th indent 
92/121/EEC 
Article 1 ( d) 
89/647/EEC 
Article 2 (1), 2nd to 5th indents 
(as amended by 95/15/EC, 
Article 1) 
18. "Non-bank sector" shall mean all borrowers other than credit 
institutions as defined in points 16 and 17, central governments and 
central banks, regional governments and local authorities, the European 
Communities, the European Investment Bank (EIB) and multilateral 
development banks as defined in point 19; 
19. "Multilateral development banks" shal] mean the International Bank for 
Reconstruction and Development, the International Finance 
Corporation, the Inter-American Development Bank, the Asian 
Development Bank, the African Development Bank, the Council of 
E~rope Resettlement Fund, the Nordic Investment Bank, the Caribbean 
Development Bank, the European Bank for Reconstruction and 
Development, the European Investment Fund and the Inter-American 
Investment Corporation; 
20. "'Full-risk', 'medium-risk', 'medium/low-risk' and 'low-risk' off­
balance-sheet items" shall mean the items described in Article 43 (2) 
and listed in Annex II; 
21. "Financial holding company" shall mean a financial institution, the 
subsidiary undertakings of which are either exclusively or mainly credit 
institutions or financial institutions, one at least of such subsidiaries 
being a credit institution; 
22. "Mixed-activity holding company" shall mean a parent undertaking, 
other than a financial holding company or a credit institution the 
subsidiaries of which include at least one credit institution; 
23. "Ancillary banking services undertaking" shall mean an undertaking the 
principal activity of which consists in owning or managing property, 
managing data-processing services, or any other similar activity which 
is ancillary to the principal activity of o'le or more credit institutions; 
24. "Exposures for the purpose of applyi11g Articlt:s 48, 49 and 50" shall 
mean the assets and off-balance-sheet items referred to in Article 43 
and in Annexes II and IV thereto, without application of ,he weightings 
or degrees of risk there provided for; the risks referred to in Annex IV 
must be calculated in accordance with one of the methods set out in 
Annex III, without application of the weightings for counter-party 
risk; all elements entirely covered by own funds may, with the 
agreement of the competent authorities, be excluded from the definition 
of exposures provided that such own funds are not included in the 
calculation of the solvency ratio or of other monitoring ratios provided 
for in Community acts; exposures shall not include: 
-in the case of foreign exchange transactions, exposures incurred in the 
ordinary course of settlement during the 48 hours following payment, 
or 
in the case of transactions for the purchase or sale of securities, 
exposures incurred in the ordinary course of settlement during the 
five working days following payment or delivery of the securities, 
whichever is the earlier; 
23 89/647/EEC 
Article 2 (1 ), 6th to 8th indents 
(as amended by 91/31/EEC, 94/7/EC and 
9S/67/EC) 
92/30/EEC 
Article 1, 3rd to 5th indents 
92/121/EEC 
Article l (h) 
(adapted) 
25. •~Group of connected clients" shall mean: 
-~o or more natural or legal persons who, unless it is shown 
otherwise, constitute a single risk because one of them, directly or 
indirectly, has control over the other or others; or 
two or more natural or legal persons between whom there is no 
relationship of control as defined in the first indent but who are to be 
regarded as constituting a single risk because they are so 
interconnected that, if one · of them were to experience financial 
problems, the other or all of the others would be likely to encounter­
repayment difficulties; 
26. "Clos~ links" shall mean a situation in which two or more natural or 
legal persons are linked by: 
(a) participation, which shall mean the ownership, direct or by way of 
control, of 20 % or more of the voting rights or capital of an 
undertaking, or 
(b) control, which shall mean the relationship between a parent 
undertaking and a subsidiary, in all the cases referred to in Article 
I (1) and (2) of Directive 83/349/EEC, or a similar relationship 
between any natural or legal person and an undertaking; any 
subsidiary undertaking of a subsidiary undertaking shall also be 
considered a subsidiary of the parent undertaking which is at the 
head of those undert~kings. · 
A situation in which two or more natural or legal persons are 
permanently linked to one and the same person by a control 
relationship shall also be regarded as constituting a close link 
between such persons. 
Article 2 
Scope 
1. This Directive concerns taking up and pursuit of the business of 
credit institutions. This Directive shall apply to all credit institutions. 
2. Articles 25 and 52 to 56 shall also apply to financial holding companies 
and mixed-activity holding companies which have their head offices in the 
Community. 
The institutions permanently excluded by paragraph 3, with the exception, 
however, of the Member States' central banks, shall be treated as financial 
institutions for the purposes of Articles 25 and 52 to 56. 
24 92/121/EEC 
Article 1 (m) 
77/780/EEC 
Article 1, 5th indent 
(as amended by 95/26/EC, 
Article 2 (1)) 
77/780/EEC 
Article 2(1) 
89/646/EEC 
Article 2 (1) 
89/647/EEC 
Article 1 (1) 
92/30/EEC 
Article 2 
(adapted) 
3. This Directive shall not apply to: 
-the central banks of Member States, 
-post office giro institutions, 
-in Belgium, the 'lnstitut de Reescompte et de 
Garantie/Herdiscontering- en Waarborginstituut', 
-in Denmark, the 'Dansk Eksportfinansieringsfond', the 'Danmarks 
Skibskreditfond', and 'Dansk Landbrugs Realkreditfond ', 
-in Germany, the 'Kreditanstalt filr Wiederaufbau', undertakings 
which are recognized under the 'Wohnungsgemeinniltzigkeitsgesetz' 
as bodies of State housing policy and are not mainly engaged in 
banking transactions, and undertakings recognized under that law as 
non-profit housing undertakings, 
-in Greece, the "Aeec;ieel:> CnOMcea Aei'ic;+aieel:>6 Afa06yiau6" 
(Elliniki Trapeza Viomichanikis Anaptyxeos), the "(JaiaB'i 
E>atiaMoaec;epi Me AaiaBui" (Tamio Parakatathikon kai 
Danion), and the "(Ja+oatii'ieeu Caieao61:>M'i" (Tachidromiko 
Tamieftirio ), 
-in Spain, the 'Institute de Credito Oficial ', 
-in France, the 'Caisse des depots et consignations', 
-in Ireland, credit unions and the friendly societies, 
-in Italy, the 'Cassa Depositi et Prestiti', 
-in the Netherlands, the 'Nederlandse lnvesteringsbank voor 
Ontwikkelingslanden NV', the 'NV Noordelijke 
Ontwikkelingsmaatschappij', the 'NV Industriebank Limburgs 
Instituut voor Ontwikkeling en Financiering' and the 'Overijsselse 
Ontwikkelingsmaatschappij NV', 
-in Austria, undertakings recognized as housing associations in the 
public interest and the 'Osterreichische Kontrollbank AG', 
-in Portugal, 'Caixas Econ6micas' existing on 1 January 1986 with 
the exception of those incorporated as limited companies and of the 
'Caixa Econ6mica Montepio Geral', 
-in Finland, the 'Teollisen yhteistyon rahasto Oy/Fonden for 
industriellt samarbete Ab', and the 'Kera Oy/Kera Ab', 
-in Sweden, the 'Svenska Skeppshypotekskassan ', 
25 77n80/EEC 
Article 2 (2) 
(as amended by 96/13/EC, 
Article 1) 
(adapted) 
-in . the United Kingdom, the National Savings Bank, the 
Commonwealth Development Finance Company Ltd, the 
Agricultural Mortgage Corporation Ltd, the Scottish Agricultural 
Securities Corporation Ltd, the Crown Agents for overseas 
governments and administrations, credit unions and municipal banks. 
4. The Council, acting on a proposal from the Commission, which, for this 
purpose, shall consult the Committee ref erred to in Article 57 (hereinafter 
referred to as the 'Banking Advisory Committee') shall decide on any 
amendments to the list in paragraph 3. 
5. Credit institutions situated in the same Member State · and 
pennanently affiliated, on 15 December 1977, to a central body 
which supervises them and which is established in that same Member 
State, may be exempted from the requirements of Articles 6 (1), 8, 
and 59 if, no later than 15 December 1979, national law provides 
that: 
-the commitments of the central body and affiliated institutions 
are joint and several liabilities or the commitments of its 
affiliated institutions are entirely guaranteed by the central body, 
-the solvency and liquidity of the central body and of all the 
affiliated institutions are monitored as a whole on the basis of 
consolidated accounts, 
-the management of the central body is empowered to issue 
instructions to the management of the affiliated institutions. 
Credit institutions operating locally which are affiliated, subsequent 
to 15 December 1977, to a central body within the meaning of the 
first subparagraph, may benefit from the conditions laid down 
therein if they constitute normal additions to the network belonging 
to that central body. 
In the case of credit institutions other than those which are set up in 
areas newly reclaimed from the sea or have resulted from scission or 
mergers of existing institutions dependent or answerable to the 
central body, the Council, acting on a proposal from the 
Commission, which shall for this purpose, consult the Banking 
Advisory Committee, may lay down additional rule;; for the 
application of the second subparagraph including the repeal of 
exemptions provided for in the first subparagraph, where it is of the 
opinion that the affiliation of new institutions benefiting from the 
arrangements laid down in the second subparagraph might have an 
adverse effect on competition. The Council shall decide by a 
qualified majority. 
6. A credit institution which, as defined in the first subparagraph of 
paragraph (5), is affiliated to a central body in the same Member 
State may also be exempted from the provisions of Articles 5 (3) to 
(7), 40 to 51, and 65 provided that, without prejudice to the application 
of those provisions to the central body, the whole as constituted by the 
central body together with its affiliated institutions is subject to the 
abovementioned provisions on a consoiidated basis. 
In case of exemption, Articles 13, 18, 19, 20 (1) to (6), 21 and 22 shall 
apply to the whole as constituted by the central body together with its 
affiliated institutions. 
26 77/780/EEC 
Article 2 (2) 
(as amended by 96/13/EC, 
Article I) 
77/780/EEC 
Article 2 (3) 
(adapted) 
77/780/EEC 
Article 2 (4) (a), (b) and (c) 
(adapted) 
89/646/EEC 
Article 2 (3) 
89/647/EEC 
Article 1 (3) 
92/121/EEC 
Article 2 (2) (b) 
(adapted) 
Article 3 
Prohibition for undertakings other than credit institutions from 
carrying on the business of taking deposits or other repayable funds 
from the public 
The Member States shall prohibit persons or undertakings that are not credit 
institutions from carrying on the business of taking deposits or other 
repayable funds from the public. This prohibition shall not apply to the 
taking of deposits or other funds repayable by a Member State or by a 
Member State's regional or local authorities or by public international bodies 
of which one or more Member States are members or to cases expressly 
covered by national or Community legislation, provided that those activities 
.• are subject to regulations and controls intended to protect depositors and 
investors and applicable to those cases. 
TITLE II 
REQUIREMENTS FOR ACCESS TO THE TAKING UP 
AND PURSUIT OF THE BUSINESS OF 
CREDIT INSTITUTIONS 
Article 4 
Authorization 
Member States shall require credit institutions to obtain authorization before 
commencing their activities. They shall lay down the requirements for such 
authorization subject to Articles 5 to 9, and notify them to both the 
Commission and the Banking Advisory Committee. 
Article 5 
Initial capital 
l. Without prejudice to other conditions of general application laid 
down by national law, the competent authorities shall not grant 
authorization when the credit institution does not possess separate own 
funds and in cases where initial capital is less than ECU 5 million. 
Member States may decide that credit institutions which do not fulfil the 
requirement of separate own funds and which were in existence on 15 
December 1979 may continue to carry on their business. They may 
exempt such undertakings from complying with the requirement contained 
in the first subparagraph of Article 6 (1 ). 
2. The Member States shall, however, have the option of granting 
authorization to particular categories of credit institutions the initial capital of 
which is less than that prescribed in paragraph 1. In such cases: 
(a) the initial capital shall not be less than ECU 1 million; 
(b) the Member States concerned must notify the Commission of their 
reasons for making use of the option provided for in this paragraph; 
( c) when the list referred to in Article 1 I is published, the name of each 
credit institution that does not have the minimum capital prescribed in 
paragraph 1 shall be annotated to that effect; 
27 89/646/EEC 
Article 3 
77/780/EEC 
Article 3 (1) 
(adapted) 
77/780/EEC 
Article 3 (2) 
(adapted) 
89/646/EEC 
Article 4 (1) 
(adapted) 
77/780/EEC 
Article 10 (1) 3rd subparagraph 
(adapted) 
89/646/EEC 
Article 4 (2) 
(adapted) 
(d) Within a period of five years starting from 1 January 1993, the 
Commission shall draw up a report on the application of this 
paragraph in the Member States, for the attention of the Banking 
Advisory Committee. 
3. A credit institution's own funds may not fall below the amount of initial 
capital required by paragraph 1, at the time of its authorization. 
4. The Member States may decide that credit institutions already in 
existence on 1 January 1993 the own funds of which do not attain the 
levels prescribed for initial capital in paragraphs 1 and 2, may continue to 
carry on their activities. In that event, their own funds may not fall below 
the highest level reached with effect from 22 December 1989. 
5. If control of a credit institutioq falling within the category referred to in 
paragraph 4 is taken by a natural or legal person other than the person who 
controlled the institution previously, the own funds of that institution must 
attain at least the level prescribed for initial capital in paragraphs 1 and 2. 
6. __ In certain specific circumstances and with the consent of the 
competent authorities, where there is a merger of two or more credit 
institutions falling within the category referred to in paragraph 4, the own 
funds of the institution resulting from the merger may not fall below the 
total own funds of the merged institutions at the time of the merger, as long 
as the appropriate levels pursuant to paragraphs 1 and 2 have not been 
attained. 
7. __ If, in the cases referred to in paragraphs 3, 4 and 6, the own 
funds should be reduced, the competent authorities may, where the 
circumstances justify it, allow an institution a limited period in which to 
rectify its situation or cease its activities. 
Article 6 
Management body and place of the head office 
of credit institutions 
1. The competent authorities shall grant an authorization to the 
undertaking only when there are at least two persons who effectively 
direct the business of the credit institution. 
Moreover, the authorities concerned shall not grant authorization if these 
persons ____ are not of sufficiently good repute or lack sufficient 
experience to perform such duties. 
2. Each Member State shall require that: 
-any credit institution which is a legal person and which, under its 
national law, has a registered office have its head office in the same 
Member State as its registered office, 
-any other credit institution have its head office in the Member State 
which issued its authorization and in which it actually carries on its 
business. 
28 89/646/EEC 
Article 4 (2) 
(adapted) 
89/646/EEC 
Article 10 (1) to (5) 
(adapted) 
77/780/EEC 
Article 3 (2) 
(adapted) 
77/780/EEC 
Article 3 (2) (a) 
(as amended by 95/26/EC, 
Article 3 (2)) 
Article 7 
Shareholders and members 
1. The competent authorities shall not grant authorization,for the taking-up 
of the business of credit institutions before they have been informed of the 
identities of the shareholders or members, whether direct or indirect, natural 
or legal persons, that have qualifying holdings, and of the amounts of those 
holdings. 
For the purpose of the definition of qualifying holdings in the context of 
this Article, the voting rights referred to in Article 7 of Council Directive 
88/627/EEC ( 1) shall be taken into consideration. 
2. The com~etent authorities shall refuse authorization if, taking into 
account the need to ensure the sound and prudent management of a credit 
institution, they are not satisfied as to the suitability of the abovementioned 
shareholders or members. 
3. __ Where close links exist between the credit institutions and other 
natural or legal persons, the competent authorities shall grant authorization 
only if those links do not prevent the effective exercise of their supervisory 
functions. 
The competent authorities shall also refuse authorization if the laws, 
regulations or administrative provisions of a non-member country 
governing one or more natural or legal persons with which the credit 
institution has close links, or difficulties involved in their enforcement, 
prevent the effective exercise of their supervisory functions. 
The competent authorities shall require credit institutions to provide them 
with the information they require to monitor compliance with the conditions 
referred to in this paragraph on a continuous basis. 
Article 8 
Programme of operations and structural organization 
Member States shall __ require applications for authorization to be 
accompanied by a programme of operations setting out inter alia the types of 
business envisaged and the structural organization of the institution. 
(I) OJ No L348, 17.12.1988, p. 62. 
29 89/646/EEC 
Article 5, I st paragraph 
89/646/EEC 
Article I (10), 2nd subparagraph 
(adapted) 
89/646/EEC 
Article 5, 2nd paragraph 
77/780/EEC 
Article 3 (2) 
(as amended by 95/26/EC, 
Article 2 (2)) 
(adapted) 
77/780/EEC 
Article 3 (4) 
(adapted) 
Article 9 
Economic needs 
Member States may not require the application for authorization to be 
examined in terms of the economic needs of the market. 
Article JO 
Authorization refusal 
Reasons shall be given whenever ·an authorization is refused and the 
applicant shall be notified thereof within six months of receipt of the 
application or, should the latter be incomplete, within six months of the 
applicant's sending the information required for the decision. A decision 
shall, in any case, be taken within 12 months of the receipt of the application. 
Article 11 
Notification of the authorization to the Commission 
Every authorization shall be notified to the Commission. Each credit 
institution shall be entered in a list which the Commission shall publish in 
the Official Journal of the European Communities and shall keep up to date. 
Article 12 
Prior consultation with the competent authorities 
of other Member States 
There must be prior consultation with the competent authorities of the other 
Member State involved on the authorization of a credit institution which is: 
a subsidiary of a credit institution authorized_ in another Member State, 
or 
a subsidiary of the parent undertaking of a credit institution authorized 
in another Member State, or 
controlled by the same persons, whether natural or legal, as control a 
credit institution authorized in another Member State. 
Article 13 
Branches of credit institutions authorized 
in another Member State 
Host Member States may not __ require authorization or 
endowment capital for branches of credit institutions authorized in other 
Member States. The establishment and supervision of such branches shall be 
effected as prescribed in Articles 17, 20 (1) to (6) and Articles 22 and 26. 
30 77/780/EEC 
Article 3 (3) (a) 
(adapted) 
77/780/EEC 
Article 3 (6) 
77/780/EEC 
Article 3 (7) 
89/646/EEC 
Article 7 
89/646/EEC 
Article 6 (1) 
(adapted) 
Article 14 
Withdrawal of authorization 
I. The competent authorities may withdraw the authorization issued to a 
credit institution ____ only where such an institution: ___ _ 
(a) does not make use of the authorization within 12 months, expressly 
renounces the authorization or has ceased to engage in business for 
more than six months, if the Member State concerned has made no 
provision for the authorization to lapse in such cases; 
(b) has obtained the authorization through false statements or any other 
irregular means; 
(c) no longer fulfils the conditions under which authorization was granted; 
(d) no longer possesses sufficient own funds or can no longer be relied 
upon to fulfil its obligations towards its creditors, and in particular no 
longer provides security for the assets entrusted to it; 
(e) falls within one of the other cases w:iere national law provides for 
withdrawal of authorization. 
2. Reasons must be given for any withdrawal of authorization and those 
concerned informed thereof; such withdrawal shall be notified to the 
Commission. 
Article 15 
Name 
For the purpose of exercising their activities, credit institutions __ may, 
notwithstanding any provisions concerning the use of the words 'bank', 
'saving bank' or other banking names which may exist in the host Member 
State, use throughout the territory of the Community the same name as they 
use in the Member State in which their head office is situated. In the event of 
there being any danger of confusion, the host Member State may, for the 
purposes of clarification, require that the name be accompanied by certain 
explanatory particulars. 
31 77/780/EEC 
Article 8 (l) 
(adapted) 
77/780/EEC 
Article 8 (5) 
77/780/EEC 
Article 5 
(adapted) 
Article 16 · 
Qualifying holding in a credit institution 
l. The Member States shall require any natural or legal person who 
proposes to hold, directly or indirectJy a qualifying holding in a credit 
institution first to inform the competent authorities, telling them of the size of 
the intended holding. Such a person must likewise inform the competent 
authorities if he proposes to increase his qualifying holding so that the 
proportion of the voting rights or of the capital held by him would reach or 
exceed 20 %, 33 % or 50 % or so that the credit institution would become his 
subsidiary. 
Without prejudice to the provisions of paragraph 2, the competent authorities 
shall have a maximum of three months from the date of the notification 
provided for in the first subparagraph to oppose such a plan if, in view of the 
need to ensure sound and prudent management of the credit institution, they 
are not satisfied as to the suitability of the person referred to in the first 
subparagraph. If they do not oppose the plan referred to in the first 
subparagraph, they may fix a maximum period for its implementation. 
2. If the acquirer of the holdings referred to in paragraph I is a credit 
institution authorized in another Member State or the parent undertaking of a 
credit institution authorized in another Member State or a natural or legal 
person controlling a credit institution authorized in another Member State 
and if, as a result of that acquisition, the institution in which the acquirer 
proposes to hold a holding would become a subsidiary or subject to the 
control of the acquirer, the assessment of the acquisition must be the subject 
of the prior consultation referred to in Article 12. 
3. The Member States shall require any natural or legal person who 
proposes to dispose, directly or indirectly, of a qualifying holding in a credit 
institution first to inform the competent authorities, telling them of the size of 
his intended holding. Such a person must likewise inform the competent 
authorities if he proposes to reduce his qualifying holding so that the 
proportion of the voting rights or of the capital held by him would fall below 
20 %, 33 % or 50 % or so that the credit institution would cease to be his 
subsidiary. 
4. On becoming aware of them, credit institutions shall inform the 
competent authorities of any acquisitions or disposals of holdings in their 
capital that cause holdings to exceed or fall below one of the thresholds 
referred to in paragraphs l and 3. 
They shall also, at least once a year, inform them of the names of 
shareholders and members possessing qualifyi_ng holdings and the sizes of 
such holdings as shown, for example, by the information received at the 
annual general meetings of shareholders and members or as a result of 
compliance with the regulations relating to companies listed on stock 
exchanges. 
32 89/646/EEC 
Article 11 
(Corrigendum, OJ No L 311, 
14.11.1997, p. 34) 
5. The Member States shall require that, where the influence exercised by 
the persons referr~d to in paragraph I is likely to operate to the detriment of 
the prudent and sound management of the institution, the competent 
authorities shall take appro·priate measures to put an end to that situation. 
Such measures may consist for example in injunctions, sanctions against 
directors and managers, or the suspension of the exercise of the voting rights 
attaching to the shares held by the shareholders or members in question. 
Similar measures shall apply to natural or legal persons failing to comply 
with the obligation to provide prior information, as laid down in paragraph I. 
If a holding is acquired despite the opposition of the competent authorities, 
the Member States shall, regardless of any other sanctions to be adopted, 
provide either for exercise of the corresponding voting rights to be 
suspended, or for the nullity of votes cast or for the possibility of their 
annulment. 
6. For the purposes of the definition of qualifying holding and other 
levels of holding set out in this Article, the voting rights referred to in 
Article 7 of Directive 88/627/EEC shall be taken into consideration. 
Article 17 
Procedures and internal control mechanisms 
Home Member State competent authorities shall require that every credit 
institution have sound administrative and accounting procedures and 
adequate internal control mechanisms. 
TITLE III 
PROVISIONS CONCERNING THE FREEDOM OF 
ESTABLISHMENT AND THE FREEDOM TO PROVIDE SERVICES 
Article 18 
Credit institutions 
The ~1ember States shall provide that the activities listed in Annex I may be 
carried on within their territories, in accordance with Articles 20 (1) to (6), 
21 (1) and (2), and 22, 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 another Member State, __ provided that 
such activities are covered by the authorization. 
33 89/646/EEC 
Article 11 
Corrigendum (OJ No L 311, 
14.11.1997, p. 34) 
89/646/EEC 
Article 1 (10), 2nd subparagraph 
(acJapted) 
89/646/EEC 
Article 13 (2) 
89/646/EEC 
Article 18 (1) 
(adapted) 
Article 19 
Financial institutions 
The Member States shall also provide that the activities listed in Annex I may be 
carried on with'in their territories, in accordance with Articles 20 (1) to (6), 21 (l) and 
(2), and 22, either by the establishment of a branch or by way of the provision of 
services, by any financial institution from another Member State, whether a subsidiary 
of a credit institution or the jointly-owned subsidiary of two or more credit institutions, 
the memorandum and articles of association of which permit the carrying on of those 
activities and which fulfils each of the following conditions: 
-the parent undertaking or undertakings must be authorized as credit institutions in 
the Member State by the law of which the subsidiary is governed, 
-the activities in question must a~tually be carried on within the territory of the same 
Member State, 
-the parent undertaking or undertakings must hold 90 % or more of the voting rights 
attaching to shares in the capital of the subsidiary, 
-the parent undertaking or undertakings must satisfy the competent authorities 
regarding the prudent management of the subsidiary and must have declared, with 
the consent of the relevant home Member State competent authorities, that they 
jointly and severally guarantee the commitments entered into by the subsidiary, 
the subsidiary must be effectively included, for the activities in question in 
particular, in the consolidated supervision of the parent undertaking, or of each of 
the parent undertakings, in accordance ,vith Articles 52 to 56, in particular for the 
calculation of the solvency ratio, for the control of large exposures and for 
purposes of the limitation of holdings provided for in Article 51. 
Compliance with these conditions must be verified by the competent authorities of the 
home Member State and the latter must supply the subsidiary with a certificate of 
compliance which must fom1 part of the notification referred to in Articles 20 (l) to 
(6), and 21 (l) and (2). 
The competent authorities of the home Member State shall ensure the supervision of 
the subsidiary in accordance with Articles 5 (3), 16, 17, 26, 28, 29, 30, and 32. 
The provisions of this Article shall apply mutatis muta11dis to subsidiaries, subject to 
the necessary modifications. In particular, the words 'credit institution' should be read 
as 'financial institution fulfilling the conditions laid down in Article 19' and the word 
'authorization' as 'memorandum and articles of association'. 
The second subparagraph of Article 20 (3) shall read: 
'The home Member State competent authorities shall also communicate the amount of 
own funds of t~e subsidiary financial institution and the consolidated solvency ratio of 
the credit institution which is its parent undertaking'. 
If a financial institution eligible under this Article should cease to fulfil any of the 
conditio-ns imposed, the home Member State shall notify the competent authorities of 
the host Member State and the activities carried on by that institution in the host 
Member State shall become subject to the legislation of the host Member State. 
34 89/646/EEC 
Article 18 (2) 
(as amended by 92/30/EEC, 
Article 10 (2), 2nd indent) 
Article 10 
Exercise of the right of establishment 
I. A credit institution wishing to establish a branch within the territory of 
another Member State shall notify the competent authorities of its home 
Member State. 
2. The Member State shall require every credit institution wishing to 
establish a branch in another Member State to provide the following 
information when effecting the notification referred to in paragraph I: 
(a) the Member State within the territory of which it plans to establish a 
branch; 
(b) a programme of operations setting out inter alia the types of business 
envisaged and the structural organization of the branch; 
(c) the address in the host Member State from which documents may be 
obtained; 
( d) the names of those responsible for the management of the branch. 
3. Unless the competent authorities of the home Member State have reason 
to doubt the adequacy of the administrative structure or the financial 
situation of the credit institution, taking into account the activities envisaged, 
they shall within three months of receipt of the information referred to in 
paragraph 2 communicate that information to the competent authorities of the 
host Member State and shall inform the institution concerned accordingly. 
The home Member State competent authorities shall also communicate the 
amount of own funds and the solvency ratio of the credit institution __ 
Where the competent authorities of the home Member State refuse to 
communicate the information referred to in paragraph 2 to the competent 
authorities of the host Member State, they shall give reasons for their refusal 
to the institution concerned within three months of receipt of all the 
information. That refusal or failure to reply shall be subject to a right to 
apply to the courts in the home Member State. 
4. Before the branch of a credit institution commences its activities the 
competent authorities of the host Member State shall, within two months of 
receiving the information mentioned in paragraph 3, prepare for the 
supervision of the credit institution in accordance with Article 22 and if 
necessary indicate the conditions under which, in the interest of the general 
good, those activities must be carried on in the host Member State. 
5. On receipt of a communication from the competent authorities of the host 
Member State, or in the event of the expiry of the period provided for in 
paragraph 4 without receipt of any communication from the latter, the branch 
may be established and commence its activities. 
35 89/646/EEC 
Article 19 
(adapted) 
6. In the event of a change in any of the particulars communicated pursuant 
to paragraph 2 (b), (c) or (d) or in the deposit-guarantee scheme referred to in 
paragraph 3 a credit institution shall give written notice of tl•t~ change in 
question to the competent authorities of the home and host Member States at 
least one month before making the change so as to enable the competent 
authorities of the home Member State to take a decision pursuant to 
paragraph 3 and the competent authorities of the host Member State to take a 
decision on the change pursuant to paragraph 4. 
7. Branches which have commenced their activities, in accordance with the 
provisions in force in their host Member States, before 1 January 1993, 
shall be presumed to have been subject to the procedure laid down in 
paragraphs (I) to (5). They shall be governed, from the abovementioned 
date, by paragraph 6, and by Articles 18, 19, 22 and 29. __ 
~ Article 21 
Exercise of the freedom to provide services 
I. Any credit institution wishing to exercise the freedom to provide services 
by carrying on its activities within the territory of another Member State for 
the first time shall notify the competent authorities of the home Member 
State of the activities on the list in Annex I which it intends to c ... : 1 yon. 
2. The competent authorities of the home Member State shall, within one 
month of receipt of the notification mentioned in paragraph I, send that 
notification to the competent authorities of the host Member State. 
3. This Article shall not affect rights acquired by credit institutions 
providing services before 1 January 1993. 
Article 22 
Power of the competent authorities of the host Member State 
I. Host Member States may, for statistical purposes, require that all credit 
institutions having branches within their territories shall report periodically 
on their activities in those host Member States to the competent authorities of 
those host Member States. 
In discharging the responsibilities imposed on them m Article 27, host 
Member States may require that branches of credit institutions· from other 
Member States provide the same information as they require from national 
credit institutions for that purpose. 
2. Where the competent authorities of a host Member State ascertain that an 
institution having a branch or providing services within its territory is not 
complying with the legal provisions adopted in that State pursuant to the 
provisions of this Directive involving powers of the host Member State's 
competent authorities, those authorities shall require the institution 
concerned to put an end to that irregular situation. 
36 89/646/EEC 
Article 19 
89/646/EEC 
Article 23 (1) 
(adapted) 
89/646/EEC 
Article 20 
89/646/EEC 
Article 23 (2) 
(adapted) 
89/646/EEC 
Article 21 
(adapted) 
3. If the institution concerned fails to take the necessary steps, the 
competent authorities of the host Member State shall inform the competent 
authorities of the home Member State accordingly. The competent authorities 
of the home Member State shall, at the earliest opportunity, take all 
appropriate measures to ensure that the institution concerned puts an end to 
that irregular situation. The nature of those measures shall be communicated 
to the competent authorities of the host Member State. 
4. If, despite the measures taken by the home Member State or because such 
measures prove inadequate or are not available in the Member State in 
question, the institution persists in violating the legal rules referred to in 
paragraph 2 in force in the host Member State, the latter State may, after 
informing the competent authorities of the home Member State, take 
appropriate measures to prevent or to punish further irregularities and, 
· insofar as is necessary, to prevent that institution from initiating further 
transactions within its territory. The Member States shall ensure that within 
their territories it is possible to serve the legal documents necessary for these 
measures on credit institutions. 
5. The provisions of paragraphs 1 to 4 shall not affect the power of host 
Member States to take appropriate measures to prevent or to punish 
irregularities committed within their territories which are contrary to the 
legal rules they have adopted in the interest of the general good. This shal1 
include the possibility of preventing offending institutions from initiating 
any further transactions within their territories. 
6. Any measure adopted pursuant to paragraphs 4 and 5 involving penalties 
or restrictions on the exercise of the freedom to provide 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 the authorities of which adopted it. 
7. Before following the procedure provided for in paragraphs 2, 3 and 4, 
the competent authorities of the host Member State may, in emergencies, 
take any precautionary measures necessary to protect the interests of 
depositors, investors and others to whom services are provided. The 
Commission and the competent authorities of the other Member States 
concerned must be informed of such measures at the earliest opportunity: 
The Commission may, after consulting the competent authorities of the 
Member States concerned, decide that the Member State in question must 
amend or abolish those measures. 
8. Host Member States may exercise the powers conferred on them under 
this Directive by taking appropriate measures to prevent or to punish 
irregularities committed within their territories. This shall include the 
possibility of preventing institutions from initiating further transactions 
within their territories. 
37 89/646/EEC 
Article 21 
(adapted) 
9. In the event of the withdrawal of authorization the competent authorities 
of the host Member State shall be infonned and shall take appropriate 
measures to prevent the institution concerned from initiating further 
transactions within its territory and to safeguard the interests of depositors. 
Every two years the Commission shall submit a report on such cases to the 
Banking Advisory Committee. 
I 0. The Member States shall infonn the Commission of the number and type 
of cases in which there has been a r~fusal pursuant to ArticJe 20 (1) to (6) or 
in which measures have been take~ in accordance with paragraph 4 of this 
Article. Every two years the Commission shall submit a report on such cases 
to the Banking Advisory Committee. 
11. Nothing in this Article shall prevent credit institutions with head offices 
in other Member States from advertising their services through all available 
means of communication in the host Member State, subject to any rules 
governing the fonn and the content of such advertising adopted in the 
interest of the general good. 
TITLE IV 
RELATIONS WITH THIRD COUNTRIES 
Article 23 
Notification of the subsidiaries of third countries' undertakings 
and conditions of access to the markets of these countries 
1. The competent authorities of the Member States shall inform the 
Commission: 
(a) of any authorization of a direct or indirect subsidiary one or more 
parent undertakings of which are governed by the laws of a third 
country. The Commission shall inform the Banking Advisory 
Committee accordingly; 
(b) whenever such a parent undertaking acquires a holding in a 
Community credit institution such that the latter would become its 
subsidiary. The Commission shall inform the Banking Advisory 
Committee accordingly. 
When authorization is ·granted to the direct or indirect subsidiary of one or 
more parent undertakings governed by the law of third countries, the 
structure of the group shall be specified in the notification which the 
competent authorities shall address to the Commission in accordance with 
Article 11. ------
2. The Member States shall inform the Commission of any general 
difficulties encountered by their credit institutions in establishing themselves 
or carrying on banking activities in a third country. 
3. __ The Commission shall periodically draw up a report examining 
the treatment accorded to Community credit institutions in third countries, in 
the terms referred to in paragraphs 4 and 5, as regards establishment and the 
carrying-on of banking activities, and the acquisition of holdings in third­
country credit institutions. The Commission shall submit those reports to the 
Council, together with any appropriate proposals. 
38 89/646/EEC 
Article 21 
(adapted) 
89/646/EEC 
Article 8 
(adapted) 
89/646/EEC 
Article 9 
(adapted) 
4.. Whenever it appears to the Commission, either on the basis of the reports 
referred to in paragraph 3 or on the basis of other information, that a third 
country is not granting Community credit institutions effective market access 
comparable to that granted by the Community to credit institutions from that 
third country, the Commission may submit proposals to the Council for the 
appropriate mandate for negotiation with a view to obtaining comparable 
competitive opportunities for Community credit institutions. The Council 
shall decide by a qualified majority. 
5. Whenever it appears to the Commission, either on the basis of the reports 
referred to in paragraph 3 or on the basis of other information that 
Community credit institutions in a third country do not receive national 
treatment offering the same competitive opportunities as are available to 
domestic credit institutions and the conditions of effective market access are 
not fulfilled, the Com.mission may initiate negotiations in order to remedy 
the situation. 
In the circumstances described in the first subparagraph, it may also be 
decided at any time, and in addition to initiating negotiations, in accordance 
with the procedure laid down in Article 60 (2), that the competent authorities 
of the Member States must limit or suspend their decisions regarding 
requests pending at the moment of the decision or future requests for 
authorizations and the acquisition of holdings by direct or indirect parent 
undertakings governed by the laws of the third country in question. The 
duration of the measures referred to may not exceed three months. 
Before the end of that three-month period, and in the light of the results of 
the negotiations, the Council may, acting on a proposal from the 
Commission, decide by a qualified majority whether the measures shall be 
continued. 
Such limitations or suspension may not apply to the setting up of subsidiaries 
by credit institutions or their subsidiaries duly authorized in the Community, 
or to the acquisition of holdings in Community credit institutions by such 
institutions or subsidiaries. 
6. Whenever it appears to the Commission that one of the situations 
described in paragraphs 4 and 5 obtains, the Member States shall inform it at 
its request: 
(a) of any request for the authorization of a direct or indirect subsidiary 
one or more parent undertakings of which are governed by the laws of 
the third country in question; 
(b) whenever they are informed in accordance with Article 16 that such an 
undertaking proposes to acquire a holding in a Community credit 
institution such that the latter would become its subsidiary. 
39 89/646/EEC 
Article 9 
(adapted) 
This obligation to provide infonnation shall lapse whenever an agreement is 
reached with the third country referred to in paragraph 4 or S or when the 
measures referred to in the second and third subparagraphs of paragraph 5 
cease to apply. 
7. Measures taken pursuant to this Article shall comply with the 
Community's obligations under any international agreements, bilateral or 
multilateral, governing the taking-up and pursuit of the business of credit 
institutions. · 
Article 24 
Branches of credit institutions having their head offices 
outside the Community 
I. Member States shall not apply to branches of credit institutions having 
their head office outside the Community, when commencing or carrying on 
their business, provisions which result in more favourable treatment than that 
accorded to branches of credit institutions having their head office in the 
Community. 
2. The competent authorities shall notify the Commission and the Banking 
Advisory Committee of all authorizations for branches granted to credit 
institutions having their head office outside the Community . 
3. Without prejudice to paragraph I,• the Community may, through 
agreements concluded in accordance with the Treaty with one or more third 
countries, agree to apply provisions which, on the basis of the principle of 
reciprocity, accord to branches of a credit institution having its head office 
outside the Community identical treatment throughout the territory of the 
Community. 
Article 25 
Cooperation with third countries' competent authorities 
regarding supervision on a consolidated basis 
1. The Commission may submit proposals to the Council, either at the 
request ·of a Member State or on its own initiative, for the negotiation of 
agreements" with one or more third countries regarding the means of 
exercising supervision on a consolidated basis over: 
credit institutions the parent undertakings of which have their head 
offices situated in a third country, and 
credit institutions situated in third countries the parent undertakings of 
which, whether credit institutions or financial holding companies, have 
their head offices in the Community. 
40 89/646/EEC 
Article 9 
(adapted) 
77/780/EEC 
Article 9-
92/30/EEC 
Article 8 
(adapted) 
2. The agreements referred to in paragraph 1 sha11 in particular seek to 
ensure both: 
that the competent authorities of the Member States are able to obtain 
the information necessary for the supervision, on the basis of their 
consolidated financial situations, of credit institutions or financial 
holding companies situated in the Community and which have as 
subsidiaries credit institutions or financial institutions situated outside 
the Community, or holding participation in such institutions, 
that the competent authorities of'third countries are ab]e to obtain the 
information necesrnry for the supervision of parent undertakings the 
head offices of which are situated within their territories and which 
have as subsidiaries credit institutions or financial institutions situated 
in one or more Member States, or holding participation in such 
institutions. 
3. The Commission and the Banking Advisory Committee ___ shall 
examine the outcome of the negotiations referred to in paragraph 1 and the 
resulting situation. 
TITLE V 
PRINCIPLES AND TECHNICAL INSTRUMENTS 
FOR PRUDENTIAL SUPERVISION 
Chapter 1 
Principles of prudential supervision 
Article 26 
Competence o! control of the home Member State 
1. The prudential supervision of a credit institution, includin6 that of the 
activities it carries on in accordance with Articles 18 and 19, shall be the 
responsibility of the competent authorities of the home Member State, 
without prejudice to those provisions of this Directive which give 
responsibility to the authorities of the host Member State. 
2. Paragraph l __ shall not prevent supervision on a consolidated basis 
pursuant to this Directive. 
Article 27 
Competence of the host Member State 
Host Member States shall retain responsibility in cooperation with the 
competent authorities of the home Member State for the supervision of the 
liquidity of the branches of credit institutions pending further coordination. 
Without prejudice to the measures necessary for the reinforcement of the 
European Monetary System, host Member States shall retain complete 
responsibility for the measures resulting from the implementation of their 
monetary policies. Such measures may not provide for discriminatory or 
restrictive treatment based on the fact that a credit institution is authorized in 
another Member State. 
41 92/30/EEC 
Article 8 
(adapted) 
89/646/EEC 
Article 13 
(as amended by by Directive 
92/30/EEC, Article 10 (2)) 
89/646/EEC 
Article 13 (3) 
(as amended by 92/30/EEC, 
Article 10 (2), 2nd indent) 
(adapted) 
89/646/EEC 
Article 14 (2) 
Article 28 
Collaboration concerning supervision 
The competent authorities of the Member States concerned shall collaborate 
closely in order to supervise the activities of credit institutions operating, in 
particular by having established branches there, in one or more Member 
States other than that in which their head offices are situated. They shall 
supply one another with all information concerning the management and 
ownership of such credit institutions that is likely to facilitate their 
supervision and· the examination of the conditions for their authorization, and 
all information likely to facilitate the monitoring of such institutions, in 
particular with, regard to liquidity, solvency, deposit guarantees, the limiting 
of large exposures, administrative and accounting procedures and internal 
control mechanisms. 
Article 29 
On-the-spot verification of branches established 
in another Member State 
I. Host Member States shall provide that, where a credit institution 
authorized in another Member State carries on its activities through a branch, 
the competent authorities of the home Member State may, after having first 
informed the competent authorities of the host Member State, carry out 
themselves or through the intermediary of persons they appoint for that 
purpose on-the-spot verification of the information referred to in Article 28. 
2. The competent authorities of the home Member State may also, for 
purposes of the verification of branches, have recourse to one of the other 
procedures laid down in Article 56 (7). 
3. This Article shall not affect the right of the competent authorities of the 
host Member State to carry out, in the discharge of their responsibilities under 
this Directive, on-the-spot verifications of branches established within their 
territory. 
42 77/780/EEC 
Article 7 (1) 
(as amended by 89/646/EEC, 
Article 14 (1) 
89/646/EEC 
Article 15 
89/646/EEC 
Article 15 
(as amended by 92/30/EEC, 
Article 10 (4) 
(Corrigendum, OJ No L 280, 24.9.1992, p. 54) 
89/646/EEC 
Article 15 
Article 30 
Exchange of information and professional secrecy 
1. The Member States shall provide that all persons working or who have 
worked for the competent authorities, as well as auditors or experts acting on 
behalf of the competent authorities, shall be bound by the obligation of 
professional secrecy. This means that no confidential information which they 
may receive in the course of their duties may be divulged to any person or 
authority whatsoever, except in summary or collective form, such that 
individual institutions cannot be identified, without prejudice to cases 
covered by criminal law. 
Nevertheless, where a credit institution has been declared bankrupt or is 
being compulsory wound up, confidential information which does not 
concern third parties involved in attempts to rescue that credit institution may 
be divulged in civil or commercial proceedings. 
2. Paragraph I shall not prevent the competent authorities of the various 
Member States from exchanging information in accordance with this 
Directive and with other Directives applicable to credit institutions. That 
information shall be subject to the conditions of professional secrecy 
indicated in paragraph 1. 
3. Member States may conclude cooperation agreements, providing for 
exchanges of information, with the competent authorities of third countries 
only if the infom,ation disclosed is subject to guarantees of professional 
secrecy at least equivalent to those referred to in this Article. 
4. Competent authorities rece1vmg confidential information under 
paragraphs l or 2 may use it only in the course of their duties: 
to check that the conditions governing the taking-up of the business of 
credit institutions are met and to facilitate monitoring, on a non­
consolidated or consolidated basis, of the conduct of such business, 
especially with regard to the monitoring of liquidity, solvency, large 
exposures, and administrative and accounting procedures and internal 
control mechanisms, or 
to impose sanctions, or 
in an administrative appeal against a decision of the competent 
authority, or 
in court proceedings initiated pursuant to Article 33 or to special 
provisions provided for in this or in other Directives adopted in the 
field of credit institutions. 
5. Paragraphs I and 4 shall not prccl ude the exchange _of information within 
a Member State, where there are two or more competent authorities in the 
same Member State, or between Member States, between competent 
authorities and: 
43 77/780/EEC 
Article 12 (1) to (5) 
(as amended by 89/646/EEC, 
Article 16) 
(adapted) 
authorities entrusted with the public duty of supervising other financial 
organizations and insurance companies and the authorities responsible 
for the supervision of financial markets, 
bodies involved in the liquidation and bankruptcy of credit institutions 
and in other similar procedures, 
persons responsible for carrying out statutory audits of the accounts of 
credit institutions and other financial institutions, 
in the discharge of their supervisory functions, and the disclosure to bodies 
which administer deposit-guarantee schemes of information necessary to the 
exercise of their functions. The information received shall be subject to the 
conditions of professional secrecy iVdicatrd in paragrnph I. 
6. Notwithstanding paragraphs I to 4, Member States may authorize 
exchanges of information between, the competent authorities and: 
the authorities responsible for overseeing the bodies involved in the 
liquidation and bankruptcy of credit institutions and other similar 
procedures, or 
the authorities responsible for overseeing persons charged with 
carrying out statutory audits of the accounts of insurance undertakings, 
credit institutions, investment firms and other financial institutions. 
Member States which have recourse to the provisions of the first 
subparagraph shall require at least that the following conditions are met: 
the information shall be for the purpose of performing the supervisory 
task referred to in the first subparagraph, 
information received in this context shall be subject to the conditions 
of professional secrecy imposed in paragraph I, 
where the information originates in another Member State, it may not 
be disclosed without the express agreement of the competent 
authorities which have disclosed it and, where appropriate, solely for 
the purposes for which those authorities gave their agreement. 
Member States shall communicate to the Commission and to the other 
Member States the name of the authorities v-.'hich may receive information 
pursuant to this paragraph. 
44 77/780/EEC 
Article 12 (1) to (5) 
(as amended by 89/646/EEC, 
Article 16) 
(adapted) 
77/780/EEC 
Article 12 (5) (a) 
(as amended by 95/26/EC, 
Article 4 (2)) 
(adapted) 
7. Notwithstanding paragraphs I to 4, Member States may, with the aim of 
strengthening the stability, including integrity, of the financial system, 
authorize the exchange of information between the competent authorities and 
the authorities or bodies responsible under law for the detection and 
investigation of breaches of company law. 
Member States which have recourse to the provision in the first subparagraph 
shall require at least that the following conditions are met: 
the information shall be for the purpose of performing the task referred 
to in the first subparagraph, 
information received in this context shall be subject to the conditions 
of professional secrecy imposed in paragraph I, 
where the information originates in another Member State, it may not 
be disclosed without the express agreement of the competent 
authorities which have disclosed it and, where appropriate, solely for 
the purposes for which those authorities gave their agreement. 
Where, in a Member State, the authorities or bodies referred to in the first 
subparagraph perform their task of detection or investigation with the aid, in 
view of their specific competence, of persons appointed for that purpose and 
not employed in the public sector, the possibility of exchanging information 
provided for in the first subparagraph may be extended to such persons under 
the conditions stipulated in the second subparagraph. 
In order to implement the third indent of the second subparagraph, the 
authorities or bodies referred to in the first subparagraph shall communicate 
to the competent authorities which have disclosed the information, the names 
and precise responsibilities of the persons to whom it is to be sent. 
Member States shall communicate to the Commission and to the other 
Member States the names of the authorities or bodies which may receive 
information pursuant to this paragraph. 
Before 31 December 2000, the Commission shall d~aw up a report on the 
application of the provisions of this paragraph. 
8. This Article shall not prevent a competent authority from transmitting: 
to central banks and other bodies with a similar function in their 
capacity as monetary authorities, 
where appropriate, to other public authorities responsible for 
overseeing payment systems, 
information intended for the performance of their task, nor shall it prevent 
such authorities or bodies from communicating to the competent authorities 
such information as they may need for the purposes of paragraph 4. 
Information received in this context shall be subject to the conditions of 
professional secrecy imposed in this Article. 
45 77/780/EEC 
Article 12 (S) (b) 
(as amended by 95/26/EC, 
Article 4 (3)) 
77/780/EEC 
Article 12 ( 6) 
(as amended by 95/26/EC, 
Article 4 (4)) 
9. In addition, notwithstanding the provisions referred to in paragraphs I 
and 4, the Member States may, by virtue of provisions laid down by law, 
authorize the disclosure of certain info,rmation to other departments of their 
central government administrations responsible for legislation on the 
supervision of credit institutions, financial institutions, investment services 
and insurance companies and to inspectors acting on behalf of those 
departments. 
However, such disclosures may be m~de only where necessary for reasons of 
prudential control. 
However, the Member States shall provide that information received under 
paragraphs 2 and 5 and that obtained by means of the on-the-spot verification 
referred to in Article 29 ( 1) and (2) may never be disclosed in the cases 
r~ferred to in this paragraph except with the express consent of the competent 
authorities which disclosed the information or of the competent authorities of 
the Member State in which on-the-spot verification was carried out. 
10. This Article shall not prevent the competent authorities from 
communicating the information referred to in paragraphs I to 4 to a clearing 
house or other similar body recognized under national law for the provision 
of clearing or settlement services for one of their Member States' markets if 
they consider that it is necessary to communicate the information in order to 
ensure the proper functioning of those bodies in relation to defaults or 
potential defaults by market participants. The information received in this 
context shall b~ subject to the conditions of professional secrecy imposed in 
paragraph I. The Member Stites shall, however, ensure that information 
received under paragraph 2 may not be disclosed in the circumstances 
referred to in this paragraph without the express consent of the competent 
authorities which disclosed it. 
46 77/780/EEC 
Article 12 (7) 
(as amended by 89/646/EEC, 
Article 16) 
77/780/EEC 
Article 12 (8) 
(as amended by 95/26/EC, 
Article 4 (6)) 
1. 
(a) Article 31 
Duty of persons responsible for the legal control of 
annual and consolidated accounts 
Member States shall provide at least that: 
any person authorized within the meaning of Council Directive 
84/253/EEcC1), performing in a credit institution the task described in 
Article 51 of Council Directive 78/660/EEcC2), or Article 37 of 
Council Directive 83/349/EEC, or Article 31 of Directive 
85/61 l/EEC(3); shall have a duty to report promptly to the competent 
authorities any fact or decision concerning that institution of which he 
has become aware while carrying out that task which is liable to: 
constitute a material breach of the laws, regulations or 
administrative provisions which lay down the conditions governing 
authorization or which specifically govern pursuit of the activities 
of credit institutions, or 
affect the continuous functioning of the credit institution, or 
lead to refusal to certify the accounts or to the expression of 
reservations; 
(b) that person shall likewise have a duty to report any fact and decisions 
of which he becomes aware in the course of carrying out a task as 
described in (a) in an undertaking having closed links resulting from a 
control relationship with the credit institution within which he is 
carrying out the abovementioned task. 
2. The disclosure in good faith to the competent authorities, by persons 
authorized within the meaning of Directive 84/253/EEC, of any fact or 
decision referred to in paragraph 1 shall not constitute a breach of any 
restriction on disclosure of information imposed by contract or by any 
legislative, regulatory or administrative provision and shall not i11volve such 
persons in liability of any kind. 
Article 32 
Power of sanction of the competent authorities 
Without prejudice to the procedures for the withdrawal of authorizations and 
the provisions of criminal law, the Member States shall provide that their 
respective competent authorities may, as against credit institutions or those 
who effectively control the business of credit institutions which breach laws, 
regulations or administrative provisions concerning the supervision or 
pursuit of their activities, adopt or impose in respect of them penalties or 
measures aimed specifically at ending observed breaches or the causes of 
such breaches. 77/780/EEC 
Article 12a 
(as amended by 95/26/EC, 
Article 5) 
89/646/EEC 
Article 17 
(l) OJ No L 126, 12.5.1984, p. 20. 
(2) OJ No L 222, 14. 8. 1978, p. 11. Directive as last amended by Directive 94/8/EC (OJ No L 82, 25. 3. 1994, p. 33). 
(3) OJ No L 375, 31.12.1985, p. 3. Directive as last amended by Directive 95/26/EC. 
47 
Article 33 
Right to apply to the courts 
Member States sha11 ensure that decisions taken in respect of a cre1it 
institution in pursuance of laws, regulations and administrative provisions 
adopted in accordance with this Directive may be subject to the right to 
apply to the courts. The same sha11 apply where. no decision is taken within 
six months of its submission in respect of an applicaticn for authorizat1on 
which contains all the infonnation required under the provisions in force. 
Chapter 2 
Technical instruments of prudential supervision 
Section 1 
Own funds 
Article 34 
General principles 
l. Wherever a Member State lays down by law, regulation or administrative 
action a provision in implementation of Community legislation concerning 
the prudential supervision of an operative credit institution which uses the 
term or refers to the concept of own funds, it shall bring this term or concept 
into line with the definition given in paragraphs 2, 3 and 4 and Articles 35 
to 38. 
2. Subject to the limits imposed in Article 38, the unconsolidated own 
funds of credit institutions shall consist of the following items: 
(I) capital within the meaning of Article 22 of Directive 86/635/EEC, in 
so far as it has been paid up, plus share premium accounts but 
excluding cumulative preferential shares; 
(2) reserves within the meaning of Article 23 of Directive 86/635/EEC and 
profits and losses brought forward as a result of the application of the 
final profit or loss. The Member States may permit inclusion of interim 
profits before a formal decision has been taken only if these profits 
have been verified by persons responsible for the auditing of the 
accounts and if it is proved to the satisfaction of the competent 
authorities that the amount thereof has been evaluated in accordance 
with the principles set out in Directive 86/635/EEC and is net of any 
foreseeable charge or dividend; 
48 77/780/EEC 
Article 13 
89/299/EEC 
Article 1 (1) 
(adapted) 
89/299/EEC 
Article 2 (1) 
(adapted) 
(3) funds for general banking risks within the meaning of Article 38 of 
Directive 86/635/EEC; :, 
(4) revaluation reserves within the meaning of Article 33 of Directive 
78/660/EEC; __ _ 
(5) value adjustments within the meaning of Article 37 (2) of Directive 
86/635/EEC; 
(6) other items within the meaning of Article 35; 
(7) the commitments of the members of credit institutions set up as 
cooperative societies and the joint and several commitments of the 
borrowers of certain institutions organized as funds, as referred to in 
Article 36 (1 ); 
(8) fixed-term cumulative preferential shares and subordinated loan capital 
as referred to in Article 36 (3). 
The following items shall be deducted in accordance with Article 38: 
(9) own shares at book value held by a credit institution; 
(I 0) intangible assets within the meaning of Article 4 (9) ('Assets') of 
Directive 86/635/EEC; 
( 11) material losses of a relevant nature of the current financial year; 
( 12) holdings in other credit and financial institutions amounting to more 
than I O % of their capital, subordinated claims and the instruments 
referred to in Article 35 which a credit institution holds in respect of 
credit and financial institutions in which it has holdings exceeding I 0 
% ' 
of the capital in each case. 
Where shares in another credit or financial institution are held 
temporarily for the purposes of a financial assistance operation 
designed to re-organise and save that institution, the competent 
authority may waive this provision; 
( 13) holdings in other credit and financial institutions of up to 10 % of their 
capital, the subordinated claims and the instruments referred to in 
Article 35 which a credit institution holds in respect of credit and 
financial institutions other than those referred to in point 12 in respect 
of the amount of the total of such holdings, subordinated cJaims and 
instruments which exceed I O % of that credit institution's own funds 
calculated before the deduction of items in point I 2 and in this point .. 
49 89/299/EEC 
Article 2 (l) 
(adapted) 
__ Pending subsequent coordination of the provisions on consolidation, 
Member States may provide that, for the calculation of unconsolidated own 
funds, parent companies subject to supervision on a consolidated basis need 
not deduct their holdings in other credit institutions or financial institutions 
which are included in the consolidation. This provision shall apply to all the 
prudential rules harmonized by Community acts. 
3. The concept of own funds as defined in points l to 8 of paragraph 2 
embodies a maximum number of items and amounts. The use of those items 
and the fixing of lower ceilings, and the deduction of items other than those 
listed in points 9 to 13 of paragraph 2 shall be left to the discretion of the 
Member States. Member States shall nevertheless be obliged to consider 
increased convergence with a view to a common definition of own funds. 
To that end, the Commission shall, by 1 January 1996 at the latest, submit 
a report to the European Parliament and to the Council on the application of 
this Article and Articles 35 to 39, accompanied, where appropriate, by such 
proposals for amendment as it shall deem necessary. Not later than 1 
January 1998, the European Parliament and the Council shall, acting in 
accordance with the procedure laid down in Article 189b of the Treaty 
and after consultation of the Economic and Social Committee, examine the 
definition of own funds with a view to the uniform application of the 
common definition. 
4. The items listed in points l to 5 of paragraph 2 must be available to a 
credit institution for unrestricted and immediate use to cover risks or. losses 
as soon as these occur. The amount must be net of any foreseeable tax charge 
at the moment of its calculation or be suitably adjusted in so far as such tax 
charges reduce the amount up to which these items may be applied to cover 
risks or losses. 
Article 35 
Other items 
I. The concept of own funds used !:>y a Member State may include other 
items provided that, whatever their legal or accounting designations might 
be, they have the following characteristics: 
(a) they are freely available to the credit institution to cover normal banking 
risks where revenue or capital losses have not yet been identified; 
(b) their existence is disclosed in internal accounting records; 
( c) their amount js determined by the management of the credit institution, 
verified by independent auditors, made known to the competent 
authorities and placed under the supervision of the latter. __ _ 
50 89/299/EEC 
Article 2 (1) 
(adapted) 
89/299/EEC 
Article 2 (2) 
(adapted) 
89/299/EEC 
Article 2 (3) 
89/299/EEC 
Article 3 
(adapted) 
2. Securities of indeterminate duration and other instruments that fulfil the 
following conditionsmay also be accepted as other items: 
(a) they may not be reimbursed on the bearer's initiative or without the prior 
agreement of the competent authority; 
(b) the debt agreement must provide for the credit institution to have the 
option of deferring the payment of interest on the debt; 
(c) the lender's claims on the credit institution must be wholly subordinated 
to those of all non-subordinated creditors; 
( d) the documents governing the issue of the securities must provide for debt 
and unpaid interest to be such as to absorb losses, whilst leaving the 
credit institution in a position to continue trading; 
(e) only fully paid-up amounts shall be taken into account. · 
To these may be added cumulative. preferential shares other than those 
referred to in point 8 of Article 34 (2). 
Article 36 
Other provisions concerning own funds 
I . The commitments of the members of credit institutions set up as 
cooperative societies referred to in point 7 of Article 34 (2), shall comprise 
those societies' uncalled capital, together with the legal commitments of the 
members of those cooperative societies to make additional non-refundable 
payments should the credit institution incur a loss, in which case it must be 
possible to demand those payments without delay. 
The joint and several commitments of borrowers in the case of credit 
institutions organized as funds shall be treated in the same way as the 
preceding items. 
All such items may be included in own funds in so far as they are counted as 
the own funds of institutions of this category under national law. 
2. Member States shall not include in the own funds of public credit 
institutions guarantees which they or their local authorities extend to such 
entities. ----
3. Member States or the competent authorities may include fixed-term 
cumulative preferential shares referred to in point 8 of Article 34 (2) and 
subordinated loan capital referred to in that provision in own funds, if 
binding agreements exist under which, in the event of the bankruptcy or 
liquidation of the credit institution, they rank after the claims of all other 
creditors and are not to be repaid until all other debts outstanding at the time 
have been settled. 
51 89/299/EEC 
Article 3 
(adapted) 
~ 
.89/299/EEC 
Article 4 
(adapted) 
Subordinated loan capital must also fulfil the following criteria: 
(a) only fully paid-up funds may be taken into account; 
(b) the loans involved must have an original maturity of at least five years, 
after which they may be repaid; if the maturity of the debt is not fixed, 
they shall be repayable only subject to five years' notice unless the loans 
are no longer considered as own funds or unless the prior consent of the 
competent authorities is specifically required for early repayment. The 
competent authorities may grant permission for the early repayment of 
such loans provided the request is made at the initiative of the issuer and 
the solvency of the credit institution in question is not affected; 
(c) the extent to which they may rank as own funds must be gradually 
reduced during at least the last five years before the repayment date; 
( d) the loan agreement must not include any clause providing that in 
specified circumstances, other than the winding-up of the credit 
institution, the debt will become repayable before the agreed repayment 
date. 
Article 37 
Calculation of own funds on a consolidated basis 
1. Where the calculation is to be made on a consolidated basis, the 
consolidated amounts relating to the items listed under Article 34 (2) shall be 
used in accordance with the rules laid down in Articles 52 to 56. Moreover, 
the following may, when they are credit ('negative') items, be regarded as 
consolidated reserves for the calculation of own funds: 
any minority interests within the meaning of Article 21 of Directive 
83/349/EEC, where the global integration method is used, 
the first consolidation difference within the meaning of Articles 19, 30 
and 31 of Directive 83/349/EEC, 
the translation differences included in consolidated reserves in 
accordance with Article 39 (6) of Directive 86/635/EEC, 
any difference resulting from the inclusion of certain part1c1pating 
interests in accordance with the method prescribed in Article 33 of 
Directive 83/349/EEC. 
2. Where the above are debit ('positive') items, they must be deducted in the 
calculation of consolidated own funds. 
52 89/299/EEC 
Article 4 
(adapted) 
89/299/EEC 
Article 5 
(adapted) 
Article 38 
Deductions and limits 
I. The items referred to in points 4 to 8 of Article 34 (2), __ shall be 
subject to the following limits: .. _ 
(a) the total of the items in points 4 to 8 may not exceed a maximum of 
100 % of the items in points 1 plus 2 and 3 minus 9, 10 and 11; 
(b ), the total of the items in points 7 and 8 may not exceed a maximum of 
50 % of the items in points 1 plus 2 and 3 minus 9, 10 and 11; 
( c) the total of the items in points 12 and 13 shall be deducted from the 
total of the items. 
2. The competent authorities may authorize credit institutions to exceed the 
limit laid down in paragraph l _ in temporary and exceptional circumstances. 
Article 39 
Provision of proof to the competent authorities 
Compliance with the conditions laid down in Article 34 (2), (3) and (4) and 
Articles 35 to 38 must be proved to the satisfaction of the competent 
authorities. 
Section 2 
Solvency ratio 
Article 40 
General principles 
1. The solvency ratio ___ expresses own funds, as defined in Article 
41, as a proportion of total assets and off-balance-sheet items, risk-adjusted 
in accordance with Article 42. 
2. The solvency ratios of credit institutions which are neither parent 
undertakings as defined in Article 1 of Directive 83/349/EEC, nor 
subsidiaries of such undertakings shall be calculated on an individual basis. 
3. The solvency ratios of credit institutions which are parent undertakings 
shall be calculated on J consolidated basis in accordance with the methods 
laid down in this Directive and in Directive ____ 86/635/EEC. 
4. The competent authorities responsible for authorizinr and supervising a 
parent undertaking which is a credit institution may also require the 
calculation of a subconsolidated or unconsolidated ratio in respect of that 
parent undertaking and of any of its subsidiaries which are subject to 
authoriz.ation and ~upervision by them. Where such monitoring of the 
satisfactory allocation of capital within a banking group is not carried out, 
other measures must be taken to attain that end. 
53 89/29WEEC 
Article 6 (1) and (4) 
(as amended by 91/633/EEC, 
Article 1 (1)) 
~.8. 9/299/EEC 
Article 7 
' 
89/647/EEC 
Article 3 (1) to (4) 
(as amended by 92/30/EEC, 
Article 10 (2), 3rd indent) 
(adapted) 
S. Without prejudice to credit institutions' compliance with the 
requirements of paragraphs 2, 3 and 4, and of Article S2 (8) and (9), the 
competent authorities shall ensure that ratios are calculated not less than 
twice each year, either by credit institutions themselves, which shall 
communicate the results and any component data required to the competent 
authorities, or by the competent authorities, using data supplied by the credit 
institutions. 
6. The valuation of assets and off-balance-sheet items shall be ~ffected in 
accordance with Directive 86/635/EEC. __ _ 
Article 41 
The numerator: own funds 
Own funds as defined in this Directive shall form the numerator of the 
solvency ratio. 
Article 42 
The denominator: risk-adjusted assets and 
off-balance-sheet items 
I. Degrees of credit risk, expressed as percentage weightings, shall be 
assigned to asset items in accordance with Articles 43 and 44, and 
exceptionally Articles 4S, 62 and 63. The balance-sheet value of each asset 
shall then be multiplied by the relevant weighting to produce a risk-adjusted 
value. 
2. In the case of the off-balance-sheet items listed in Annex II, a two-stage 
calculation as prescribed in Article 43 (2) shall be used. 
3. In the case of the interest-rate and foreign-exchange-related off-balance­
sheet items referred to in Article 43 (3 ), the potential costs of replacing 
contracts in the event of counterparty default shall be calculated by means of 
one of the two methods set out in Annex Ill Those costs shall be multiplied 
by the relevant counterparty weightings in Article 43 (I), except that the 
l 00 % weightings as provided for there shall be replaced by 50 % 
weightings to produce risk-adjusted values. 
4. The total of the risk-adjusted values of the assets and off-balance-sheet 
items mentioned in paragraphs 2 and 3 shall be the denominator of the 
solvency ratio. 
54 89/647/EEC 
Article 3 (7) and (8) 
(adapted) 
189/647/EEC 
Article 4 
89/647/EEC 
Article S 
Article 43 
Risk weightings 
I. The following weightings shall be applied to the various categories of 
asset items, although the competent authorities may fix higher weightings as 
they see fit: 
(a) Zero weighting 
( 1) cash in hand and. equivalent items; 
(2) asset items constituting claims on Zone A central governments and 
central banks; 
(3) asset items constituting claims on the European Communities; 
(4) 
(5) asset items constituting claims carrying the explicit guarantees of 
Zone A central governments and central banks or of the European 
Communities; 
asset items constituting claims on Zone B central governments and 
central banks denominated and funded in the national currencies of the 
borrowers; 
(6) asset items constituting claims carrying the explicit guarantees of Zone 
B central governments and central banks denominated and funded in the 
national currency common to the guarantor and the borrower; 
(7) asset items secured, to the satisfaction of the competent authorities, by 
collateral in the form of Zone A central government or central bank 
securities or securities issued by the European Communities or by cash 
deposits placed with the lending institution or by certificates of deposit 
or similar instruments issued by and lodged with the latter; 
(b) 20 % weighting 
(I) asset items constituting claims on the European rnvestment Bank (EIB); 
(2) asset items constituting claims on multilateral development banks; 
(3) asset items constituting claims carrying the explicit guarantee of the 
European Investment Bank (EIB); 
(4) asset items constituting claims carrying the explicit guarantees of 
multilateral development banks; 
(5) asset items constituting claims on Zone A regional governments or local 
authorities, subject to Article 44; 
(6) asset items constituting claims carrying the explicit guarantees of Zone 
A regional governments or local authorities, subject to Article 44; 
(7) asset items constituting claims on Zone A credit institutions but not 
constituting such institutions' own funds; ___ _ 
55 89/647/EEC 
Article 6 
89/647/EEC 
Articl~ 6 
(as amended by 95/15/EC, 
Article 2) 
89/647/EEC 
Article 6 
(adapted) 
(8) asset items constituting claims with a maturity of one year or less, on 
Zone B credit institutions, other than securities issued by such 
institutions which are recognized as components of their own funds; 
(9) asset items carrying the explicit guarantees of Zone A credit 
institutions; 
( I O) asset items constituting claims with a maturity of one year or less 
carrying the explicit guarantees of Zone B credit institutions; 
(11) asset items secured, to the satisfaction of the competent authorities, 
by collateral in the form of securities issued by the EIB or by 
multilateral development banks; 
(I 2) cash items in the process of collection; 
(c) 50 % weighting 
(I) loans fully and completely secured, to the satisfaction of the 
competent authorities, by mortgages on residential property which is 
or will be occupied or let by the borrower, and loans fully and 
completely secured. to the satisfaction of the competent authorities. 
by shares in Finnish residential housing companies, operating in 
accordance with the Finnish Housing Company Act of 1991 or 
subsequent equivalent legislation, in respect of residential property 
which is or will be occupied or let by the borrower; 
(2) prepayments and accrued income: these assets shall be subject to the 
weighting corresponding to the counterparty where a credit 
institution is able to determine it in accordance with Directive 
86/635/EEC. Otherwise, where it is unable to determine the 
counterparty, it shall apply a flat-rate weighting of 50 %; 
56 89/647/EEC 
Article 6 
(adapted) 
(as amended by 95/1/EC, Euratom, 
ECSC, . 
Annex I, point XI, 8, III, 2 (a)) 
(d) JOO% weighting 
( J) asset items constituting claims on Zone B central governments and 
central banks except where denominated and funded in the national 
currency of the borrower; 
(2) asset items constituting claims on Zone B regional governments or 
local authorities; 
(3) asset items constituting claims with a maturity of more than one year 
on Zone B credit institutions; 
( 4) asset items constituting claims on the Zone A or Zone B non-bank 
sectors; 
(5) tangible "Assets" within the meaning of Article 4 (10) of Directive 
86/635/EEC; 
(6) holdings of shares, participation and other components of the own 
funds of other credit institutions which are not deducted from the 
own funds of the lending institutions: 
(7) all other assets except where deducted from own funds. 
2. The following treatment shall apply to off-balance-sheet items other than 
those covered in paragraph 3. They shall first be grouped according to the 
risk groupings set out in Annex II. The full value of the full-risk items shall 
be taken into account, 50 % of the value of the medium-risk items and 20 % 
of the medium/low-risk items, while the value of low-risk items shall be set 
at zero. The second stage shall be to multiply the off-balance-sheet values, 
adjusted as described above, by the weightings attributable to the relevant 
counterparties in accordance with the treatment of asset items prescribed in 
paragraph 1 and Article 44., In the case of asset sale and repurchase 
agreements and outright forward purchases, the weightings shall be those 
attaching to the assets in question and not to the counterparties to the 
transactions. 
57 89/647/EEC 
Article 6 
{adapted) 
3. The methods set out in Annex III shall be applied to the interest-rate and 
foreign-exchange risks listed in Annex IV. 
4. Where off-balance-sheet items carry explicit guarantees, they shall be 
weighted as if they had been incurred on behalf of the guarantor rather than 
the counterparty. Where the potential exposure arising from off-balance­
sheet transactions is fully and completely secured, to the satisfaction of the 
competent authorities, by any of the asset items recognized as collateral in 
points (a) (7) and (b) (11) of paragraph 1, weightings of O % or 20 % shall 
apply depending on the collateral in question. 
5. Where asset and off-balance-sheet items are given a lower weighting 
because of the existence of explicit guarantees or collateral acceptable to the 
competent authorities, the lower weighting shall apply only to that part 
which is guaranteed or which is fully covered by the collateral. 
Article 44 
Weighting of claims for regional governments 
or local authorities of the Member States 
I. Notwithstanding the requirements of Article 43 (1) (b ), the Member 
States may fix a weighting of O % for their own regional governments and 
local authorities if there is no difference in risk between claims on the latter 
and claims on their central governments because of the revenue-raising 
powers of the regional governments and local authorities and the existence of 
specific institutional arrangements the effect of which is to reduce the 
chances of default by the latter. A zero-weighting fixed in accordance with 
these criteria shall apply to claims on and off-balance-sheet items incurred on 
behalf of the regional governments and local authorities in question and 
claims on others and off-balance-sheet items incurred on behalf of others 
and guaranteed by those regional governments and local authorities. 
2. The Member States shall notify the Commission if they believe a zero­
weighting to be justified according to the criteria laid down in paragraph I. 
The Commission shall circulate that information. Other Member States may 
offer the credit institutions under the supervision of their competent 
authorities the possibility of applying a zero-weighting where they undertake 
business with the regional governments or local authorities in question or 
where they hold claims guaranteed by the latter. 
58 89/647/EEC 
Article 6 
89/647/EEC 
Article 7 
Article 45 
Other weighting 
l. The Member States may apply a weighting of 20 % to asset items which 
are secured, to the satisfaction of the competent authorities concerned, by 
collateral in the form of securities issued by Zone A regional governments or 
local authorities, by deposits placed with Zone A credit institutions other 
than the lending institution, or by certificates of deposit of similar 
instruments issued by those credit institutions. 
2. The Member States may apply a weighting of 10 % to clai~s on 
institutions specializing in the inter-bank and public-debt markets in their 
home Member States and subject to close supervision by the competent 
authorities where those asset items are fully and completely secured, to the 
satisfaction of the competent authorities of the home M~mber States, by a 
combination of asset items mentioned in Article 43 (1) (a) and (b) recognized 
by the latter as constituting a~equate collateral. 
3. The Member States shall notify the Commission of any prov1s1ons 
adopted pursuant to paragraphs l and 2 and of the grounds for such 
provisions. The Commission shall forward that information to the Member 
States. The Commission shall periodically examine the implications of those 
provisions in order to ensure that they do not result in any distortions of 
competition. __ _ 
Article 46 
Administrative bodies and non-commercial undertakings 
For the purposes of Article 43 (1) (b), the competent authorities may include 
within the concept of regional governments and local authorities non­
commercial administrative bodies responsible to regional governments or 
local authorities, and those non-commercial undertakings owned by central 
governments, regional governments, local authorities or authorities which, in 
the view of the competent authorities, exercise the same responsibilities as 
regional and local authorities. 
Article 47 
Solvency ratio level 
I. __ Credit institutions shall be required permanently to maintain the 
ratio defined in Article 40 at a level of at least 8 %. 
2. Notwithstanding paragraph 1, the competent authorities may prescribe 
higher minimum ratios as they consider appropriate. 
59 89/647/EEC 
Article 8 
(adapted) 
89/647/EEC 
Article 2 (2) 
(adapted) 
89/647/EEC 
Article 10 
{adapted) 
3. If the ratio falls below 8 % the competent authorities shall ensure that the 
credit institution in question takes appropriate measures to restore the ratio to 
the agreed minimum as quickly as possible. 
Section 3 
Large exposures 
Article 48 
Reporting of large exposures 
1. A credit institution's exposure to a client or group of connected clients 
shall be considered a large exposure where its value is equal to or exceeds 
10 % of its own funds. 
2. A credit institution shall report every large exposure within the 
meaning of paragraph 1 to the competent authorities. Member States shall 
provide that reporting is to be carried out, at their discretion, in accordance 
with one of the following two methods: 
reporting of all large exposures at least once a year, combined with 
reporting during the year of all new large exposures and any 
increases in existing large exposures of at least 20 % with respect to 
the previous communication, 
reporting of all large exposures at least four times a year. 
3. Exposures exempted under points (a), (b), (c), (d), (f), (g) and (h) of 
Article 49 (7) need not, however, be reported as laid down in paragraph 2. 
The reporting frequency laid down in the second indent of paragraph 2 
may be reduced to twice a year for the exposures referred to in points (a), 
(b), (c), (d), (f), (g) and (h) of Article 49 (7) and also in paragraphs (8), 
(9) and ( I 0). 
4. The competent authorities shall require that every credit institution 
have sound administrati\'e and accounting procedures and adequate 
internal control mechanisms for the purpose of identifying and recording 
all large exposures and subsequent changes to them, as defined and 
required by this Directive, and for that of monitoring those exposures in 
the light of each credit institution's own exposure policies. 
Where a credit institution invokes paragraph 3, it shall keep a record of the 
grounds advanced for at least one year after the event giving rise to the 
dispensation, so that the competent authorities may establish whether it is 
justified. 
60 89/647/EEC 
Article 10 
(adapted) 
92/121/EEC 
Article 3 
(adapted) 
". 
Article 49 
Limits on large exposures 
1. A credit institution may not incur an exposure to a client or group of 
connected clients the value of which exceeds 25 % of its own funds. 
2. Where that client or group of connected clients is the parent undertaking 
or subsidiary of the credit institution and/or one or more subsidiaries of that 
parent undertaking, the percentage laid down in paragraph I shall be reduced 
to 20 %. Member States may, however, exempt the exposures incurred to 
such clients from the 20 % limit if they provide for specific monitoring of 
such exposures by other measures or procedures. They shall inform the 
Commission and the Banking Advisory Committee of the content of such 
measures or procedures. 
3. A credit institution may not incur large exposures which in total exceed 
800 % of its own funds. 
4. Member States may impose limits more stringent than those laid down in 
paragraphs I, 2 and 3. 
5. A credit institution shall at all times comply with the limits laid down in 
paragraphs 1, 2 and 3 in respect of its exposures. If in an exceptional case 
exposures exceed those limits, that fact must be reported without delay to the 
competent authorities which may, where the circumstances warrant it, allow 
the credit institution a limited period of time in which to comply with the 
limits. 
6. Member States may fully or partially exempt from the application of 
paragraphs I, 2 and 3 exposures incurred by a credit institution to its parent 
undertaking, to other subsidiaries of that parent undertaking or to its own 
subsidiaries, in so far as those undertakings are covered by the supervision 
on a consolidated basis to which the credit institution itself is subject, in 
accordance with this Directive or with equivalent standards in force in a 
third country. 
7. Member States may fully or partially exempt the following exposures 
from the application of paragraphs 1, 2 and 3: 
(a) asset items constituting claims on Zone A central governments or central 
banks; 
(b) asset items constituting claims on the European Communities; 
(c) asset items constituting claims carrying the explicit guarantees of Zone A 
central governments or central banks o·r of the European Communities; 
(d) other exposures attributable to, or guaranteed by, Zone A central 
governments or central banks or the European Communities; 
61 92/121/EEC 
Article 4 
(adapted) 
(e) asset items constituting claims on and other exposures to Zone B central 
governments or central banks which are denominated and, where 
applicable, funded in the national currencies of the borrowers; 
(t) asset items and other exposures secured, to the satisfaction of the 
competent authorities, by collateral in the form of Zone A central 
government or central bank securities, or securities issued by the 
European Communities or by Member State regional or local authorities 
for which Article 44 lays down a zero weighting for solvency purposes; 
(g) asset items and other exposures secured, to the satisfaction of the 
competent authorities, by collateral in the form of cash deposits placed 
with the lending institution or with a credit institution which is the parent 
undertaking or a subsidiary of the lending institution; 
(h) asset items and other exposures secured, to the satisfaction of the 
competent authorities, by collateral in the form of certificates of deposit 
issued by the lending institution or by a credit institution which is the 
parent undertaking or a subsidiary of the lending institution and lodged 
with either of them; 
(i) asset items constituting claims on and other exposures to credit 
institutions, with a maturity of one year or less, but not constituting such 
institutions' own funds; __ _ 
(j) asset items constituting claims on and other exposures to those 
institutions which are not credit institutions but which fulfil the 
conditions referred to in Article 45 (2) __ , with a maturity of one year 
or less, and secured in accordance with the same paragraph; 
(k) bills of trade and other similar bills, with a maturity of one year or less, 
bearing the signatures of other credit institutions; 
(1) debt securities as defined in Article 22 ( 4) of Directive 85/611/EEC; 
(m)pending subsequent coordination, holdings in the insurance companies 
referred to in Article 51 (3) __ up to 40 % of the own funds of the 
credit institution acquiring such a holding; 
(n) asset items constituting claims on regional or central credit institutions 
with which the lending institution is associated in .a network in 
accordance with legal or statutory provisions and which are responsible, 
under those provisions, for cash-clearing operations within the network; 
62 92/121/EEC 
Article 4 
(adapted) 
(o) exposures secured, to the satisfaction of the competent authorities, by 
collateral in the form of securities other than those referred to in (f) 
provided that those securities are not issued by the credit institution 
itself, its parent company or one of their subsidiaries, or by the client 
or group of. connected clients in question. The securities used as 
collateral must be valued at market price, have a value that exceeds the 
exposures guaranteed and be either traded on a stock exchange or 
effectively negotiable and regularly quoted on a market operated under 
the auspices of recognized professional operators and allowing, to the 
satisfaction of the competent authorities of the Member State of origin 
of the. credit institution, for the establishment of an objective price 
such that the excess value of the securities may be verified at any time. 
The. excess value required shall be I 00 %; it shall, however, be 150 % 
in the case of shares and 50 % in the case of debt securities issued by 
credit institutions, Member State regional or local authorities other 
than those referred to in Article 44, and in the case of debt securities 
issued by the European Investment Bank and multilateral development 
banks _. Securities used as collateral may not constitute credit 
institutions' own funds; ___ _ 
(p) loans secured, to the satisfaction of the competent authorities, by 
mortgages on residential property or by shares in Finnish residential 
housing companies. operating in accordance with the Finnish Housing 
Company Act of 1991 or subsequent equivalent legislation and leasing 
transactions under which the lessor retains full ownership of the 
residential property leased for as long as the lessee has not exercised 
his option to purchase, in all cases up to 50 % of the value of the 
residential property concerned. The value of the property shall be 
calculated, to the satisfaction of the competent authorities, on the basis 
of strict valuation standards laid down by law, regulation or 
administrative provisions. Valuation shall be carried out at least once a 
year. For the purposes of this point residential property shall mean a 
residence to be occupied ~r let by the borrower; 
(q) 50 % of the medium/low-risk off-balance-sheet items referred to in 
Annex II; 
(r) subject to the competent authorities' agreement, guarantees other than 
loan guarantees which have a legal or regulatory basis and are given 
for their members by mutual guarantee schemes possessing the status 
of credit institutions __ , subject to a weighting of 20 % of their 
amount. 
Member States shall inform the Commission of the use they make of 
this option in order to ensure that it does not result in dist9rtions of 
competition. ___ By 21 December 1997 at the latest, the 
Commission shall submit to the Council a report accompanied, if 
necessary, by appropriate proposals; 
(s) the low-risk off-balance-sheet items referred to in Annex II ___ , to 
the extent that an agreement has been concluded with the client or 
group of connected clients under which the exposure may be incurred 
only if it has been ascertained that it will not cause the limits 
applicable under paragraphs 1, 2 and 3 to be exceeded. 
63 92/121/EEC 
Article 4 
(adapted) 
(as amended by 95/1/EC, Euratom, 
ECSC, 
Annex I, point XI, B, III, (3) (a)) 
(adapted) 
8. For the purposes of paragraphs I, 2 and 3, Member States may apply a 
weighting of 20 % to asset items constituting claims on Member State 
regional and local authorities and to other exposures to or guaranteed by such 
authorities; subject to the conditions laid down in Article 44, however, 
Member States may reduce that rate to 0 %. 
9. For the purposes of paragraphs I, 2 and 3, Member States may apply a 
weighting of 20 % to asset items constituting claims on and other exposures 
to credit institutions with a maturity of more than one but nof more than three 
years and a weighting of 50 % to asset items constituting claims on credit 
institutions with a maturity of more than three years, provided that the latter 
are represented by debt instruments that were issued by a credit institution 
and that those debt instruments are, in the opini9n of the competent 
authorities, effectively negotiable on a market made up of professional 
operators and are subject to daily quotation on that market, or the issue of 
which was authorized by the competent authorities of the Member State of 
origin of the issuing credit institution. In no case may any of these items 
constitute own funds. 
10. By way of derogation from point (i) of paragraph 7 and paragraph 9, 
Member States may apply a weighting of 20 % to asset items constituting 
claims on and other e·xposures to credit institutions, regardless of their 
maturity . 
.. 11. Where an exposure to a client is guaranteed by a third party, or by 
collateral in the fonn of securities issued by a third party under the 
conditions laid down in point (o) of paragraph 7, Member States may: 
treat the exposure as having been incurred to the third party rather 
than to the client, if the exposure is directly and unconditionally 
guaranteed by that third party, to the satisfaction of the competent 
authorities, 
treat the exposure as having been incurred to the third party rather 
than to the client, if the exposure defined in point ( o) of paragraph 7 
is guaranteed by collateral under the conditions there laid down. 
12. By 1 January 1999 at the latest, the Council shall, on the basis of ,a 
report from the Commission, examine the treatment of interbank exposures 
provided for in point (i) of paragraph 7 and paragraphs 9 and I 0. The 
Council shall decide on any changes to be made on a proposal from the 
Commission. 
64 92/121/EEC 
Article 4 
(adapted) 
Article SO 
Supervision on a consolidated or unconsolidated basis 
of large exposures 
1. If the credit institution is neither a parent undertaking nor a subsidiary, 
compliance with the obligations imposed in Articles 48 and 49 or in any 
other Community provision applicable to this area shall be monitored on an 
unconsolidated basis. 
2. In the other cases, compliance with the obligations imposed in Articles 
48 and 49 or in any other Community provision applicable to this area shall 
be monitored on a consolidated basis in accordance with Articles 52 to S6. 
3. Member States may waive monitoring on an individual or 
subconsolidated basis of compliance with the obligations imposed in Articles 
48 and 49 or in any other Community provision applicable to this area by a 
credit institution which, as a parent undertaking, is subject to monitoring on a 
consolidated basis and by any subsidiary of such a credit institution which is 
subject to their authorization and supervision and is covered by monitoring 
on a consolidated basis. 
Member States may also waive such monitoring where the parent 
undertaking is a financial holding company established in the same Member 
State as the credit institution, provided that company is subject to the same 
monitoring as credit institutions. 
In the cases referred to in the first and second subparagraphs measures must 
be taken to ensure the satisfactory allocation of risks within the group. 
65 92/121/EEC 
Article 5 (1) to (3) 
Section 4 
Qualifying holdings outside the financial sector 
Article 51 
Limits to non-financial qualifying holdings 
I. No credit institution may have a qualifying holding the amount of which 
exceeds 1 ·5 % of its own funds in an undertaking which is neither a credit 
institution, nor a financial institution, nor an undertaking carrying on an 
activity referred to in the second subparagraph of Article 43 (2) (f) of 
Directive 86/635/EEC. 
2. The total amount of a credit institution's qualifying holdings in 
undertakings other than credit institutions, financial institutions or 
undertakings carrying on activities referred to in the second subparagraph of 
Article 43 (2) (f) of Directive 86/635/EEC may not exceed 60 % of its own 
funds. 
3. The Member States need not apply the limits laid down in paragraphs I 
and 2 to holdings in insurance companies as defined in Directive 
73/239/EEC(l), and Directive 79/267/EEC(2). 
4. Shares held temporarily during a financial reconstruction or rescue 
operation or during the normal course of underwriting or in an institution's 
own name on behalf of others shall not be counted as qualifying holdings for 
the purpose of calculating the limits laid down in paragraphs I and 2. Shares 
which are not financial fixed assets as defined in Article 35 (2) of Directive 
86/635/EEC shall not be included. 
5. The limits laid down in paragraphs I and 2 may be exceeded only in 
exceptional circumstances. In such cases, however, the competent authorities 
shall require a credit institution either to increase its own furtds or to take 
other equivalent measures. 
(I) OJ No L 228, 16. 8. I 973, p. 3. Dirccti\'e as last amended by Directive 95/26/EC. 
(2) OJ No L 63, 13. 3. 1979, p. I. Dirccti\'c as last amended by Directive 95/26/EC. 
66 89/646/EEC 
Article 12 (1) to (S) 
6. The Member States may provide that the competent authorities shall not 
apply the limits laid down in paragraphs 1 and 2 if they provide that 100 % 
of the amounts by which a credit institution's qualifying holdings exceed 
those limits must be covered by own funds and that the latter shall not be 
included in the calculation of the solvency ratio. If both the limits laid down 
in paragraphs 1 and 2 are exceeded, the amount to be covered by own funds 
shall be the gre~ter of the excess amoun~s. 
Chapter 3 
Supervision on a consolidated basis 
Article 52 
Supervision on a consolidated basis 
of credit institutions 
t'. Every credit institution which has a credit institution or a financial 
institution as a subsidiary or which holds a participation in such institutions 
shall be subject, to the extent and in'the manner prescribed in Article 54, to 
supervision on the basis of its consolidated financial situation. Such 
supervision shall be exercised at least in the areas referred to in paragraphs 
5 and 6. 
2. Every credit institution the parent undertaking of which is a financial 
holding company shall be subject, to the extent and in the manner 
prescribed in Article 54, to supervision on the basis of the consolidated 
financial situation of that financial holding company. Such supervision shall 
be exercised at least in the areas referred to in paragraphs 5 and 6. The 
consolidation of the financial situation of the financial holding company 
shall not in any way-imply that the competent authorities are required to 
play a supervisory role in relation to the financial holding company standing 
alone. 
3. The Member States or the competent authorities responsible for 
exercising supervision on a consolidated basis pursuant to Article 53 may 
decide in the cases listed below that a credit institution, financial institution 
or auxiliary banking services undertaking which is a subsidiary or in which 
a participation is held need not be included in the consolidation: 
if the undertaking that should be included is situated in a third 
country where there are legal impediments to the transfer of the 
necessary information, 
if, in the opinion of the competent authorities, the undertaking that 
should be included is of negligible interest only with respect to the 
objectives of monitoring credit institutions and in all cases if the 
balance sheet total of the undertaking that should be included is less 
than the smaller of the following two amounts: ECU 10 million or 
1 % of the balance sheet total of the parent undertaking or the 
undertaking that holds the participation. If several undertakings 
meet the above criteria, they must nevertheless be included in the 
consolidation where collectively they are of non-negligible interest 
with respect to the aforementioned objectives, or 
67 89/646/EEC 
Article 12 (8) 
92/30/EEC 
Article 3 (1) to (7) 
(adapted) 
if, in the opm!on of the competent authorities responsible for 
exercising supervision on a consolidated basis, the consolidation of 
the financial situation of the undertaking that should be included 
would be inappropriate or misleading as far as the objectives of the 
supervision of credit institutions are concerned. 
4. When the competent authorities of a Member State do not include a 
credit institution subsidiary in supervision on a consolidated basis under one 
of the cases provided for in the second and third indents of paragraph 3, the 
competent authorities of the Member State in which that credit institution 
subsidiary is situated may ask the parent undertaking for information which 
may facilitate their supervision of that credit institution. 
5. Supervision of solvency, and of the adequacy of own funds to cover 
market risks and control of large exposures ___ shall be exercised on a 
consolidated basis in accordance with this Article and Articles 53 to 56. 
Member States shall adopt any measures necessary, where appropriate, to 
include financial holding companies in consolidated supervision, in 
accordance with paragraph 2. 
Compliance with the limits set in Article 51 (1) and (2) __ shall be 
supervised and controlled on the basis of the consolidated or sub­
consolidated financial situation of the credit institution. 
6. The competent authorities shall ensure that, in all the undertakings 
included in the scope of the supervision on a consolidated basis that is 
exercised over a credit institution in implementation of paragraphs l and 2, 
there are adequate internal control mechanisms for the production of any data 
and information which would be relevant for the purposes of supervision on 
a consolidated basis. 
7. Without prejudice to specific provisions contained in other Directives, 
Member States may waive application, on an individual or sub-consolidated 
basis, of the rules laid down in paragraph 5 to a credit institu~on that, as a 
parent undertaking, is subject to supervision on a consolidated basis, and to 
any subsidiary of such a credit institution which is subject to their 
authorization and supervision and is included in the supervision on a 
consolidated basis of the credit institution which is the parent company. The 
same exemption option shall be allowed where the parent undertaking is a 
financial holding company which has its head office in the same Member 
State as the credit institution, provided that it is subject to the same 
supervision as that exercised over credit institutions, and in particular the 
standards laid down in paragraph 5. 
In both cases set out in the first subparagraph, steps must be taken to ensure 
that capital is distributed adequately within the banking group. 
If the competent authorities do apply those rules individually to such credit 
institutions, they may, for the purpose of calculating own funds, make use of 
the provision in the last subparagraph of Article 34 (2). __ _ 
68 92/30/EEC 
Article 3 (1) to (7) 
(adapted) 
' . 
8. Where a credit institution the parent of which is a credit institution has 
been authorized and is situated in another Member State, the competent 
authorities which granted that authorization shall apply the rules laid down in 
paragraph 5 to that institution on an .individual or, when appropriate, a sub­
consolidated basis. 
9. Notwithstanding the requirements of paragraph 8, the competent 
authorities responsible for authorizing the subsidiary of a parent undertaking 
which is a credit institution may, by bilateral agreement, delegate their 
responsibility for supervision to the competent authorities which authorized 
and supervise the parent undertaking so that they assume responsibility for 
supervising the subsidiary in accordance with this Directive. The 
Commission must be kept informed of the existence and content of such 
agreements. It shall forward such information to the competent authorities of 
the other Member States and to the Banking Advisory Committee. 
I 0. Member States shall provide that their competent authorities responsible 
for exercising supervision on .a consolidated basis may ask the subsidiaries of 
a credit institution or a financial holding company which are not included 
within the scope of supervision on a consolidated basis for the information 
referred to in Article SS. In such a case, the procedures for transmitting and 
verifying the information laid down in that Article shall apply. 
Article 53 
Competent authorities responsible for exercising 
supervision on a consolidated basis 
I. Where a parent undertaking is a credit institution, superv1S1on on a 
consolidated basis shall be exercised by the competent authorities that 
authorized it under Article 4. 
2. Where the parent of a credit institution is a financial holding company, 
supervision on a consolidated basis shall be exercised by the competent 
authorities which authorized that credit institution under Article 4. 
However, where credit institutions authorized in two or more Member States 
have as their parent the same financial holding company, supervision on a 
consolidated basis shall be exercised by the competent authorities of the 
credit institution authorized in the Member State in which the financial 
holding company was set up. 
69 92/30/EEC 
Article 3 (8) and (9) 
(adapted) 
92/121/EEC 
Article 5 (4) and (5) 
(adapted) 
89/647/EEC 
Article 3 (5) and (6) 
(adapted) 
92/30/EEC 
Article 3 (10) 
92/30/EEC 
Article 4 
(adapted) 
If no credit institution subsidiary has been authorized in the Member State in 
which the financial holding company was set up, the competent authorities of 
the Member States concerned (including those of the Member State in which 
the financial holding company was set up) shall seek to reach agreement as 
to who amongst them will exercise supervision on a consolidated basis. In 
the absence of such agreement, supervision on a consolidated basis shall be 
exercised by the competent authorities that authorized the credit institution 
with the greatest balance sheet total; if that figure is the same, supervision on 
a consolidated basis shall be exercised by the competent authorities which 
first gave the authorization referred to in Article 4. __ _ 
3. The competent authorities con~emed may by common agreement waive 
the rules laid down in the first and second subparagraphs of paragraph 2. 
4. The agreements referred to in the third subparagraph of paragraph 2 and 
in paragraph 3 shall provide for procedures for cooperation and for the 
transmission of information such that the objectives of supervision on a 
consolidated basis can be attained. 
5. Where Member States have more than one competent authority for the 
prudential supervision of credit institutions and financial institutions, 
Member States shall take the requisite measures to organize coordination 
between such authorities. 
Article 54 
Form and extent of consolidation 
I. The competent authorities responsible for exercising supervision on a 
consolidated basis must, for the purposes of supervision, require full 
consolidation of all the credit institutions and financial institutions which are 
subsidiaries of a parent undertaking. 
However, proportional consolidation may be prescribed where, in the 
opinion of the competent authorities, the liability of a parent undertaking 
holding a share of the capital is limited to that share of the capital because of 
the liability of the other shareholders or members whose solvency is 
satisfactory. The liability of the other shareholders and members must be 
clearly established, if necessary by means of formal, signed commitments. 
2. The competent authorities responsible for carrying out supervision on a 
consolidated basis. must, in order to do so, require the proportional 
consolidation of participations in credit institutions and financial institutions 
managed by an undertaking included in the consolidation together with one 
or more undertakings not included in the consolidation, where those 
undertakings' liability is limited to the share of the capital they hold. 
3. In the case of participations or capital ties other than those referred to in 
paragraphs 1 and 2, the competent authorities shall determine whether and 
how consolidation is to be carried out. In particular, they may permit or 
require use of the equity method. That method shall not, however, constitute 
inclusion of the undertakings concerned in supervision on a consolidated 
basis. -
,o 92/30/EEC 
Article 4 
(adapted) 
92/30/EEC 
Article 5 
4. Without prejudice to paragraphs I, 2 and 3, the competent authorities 
shall determine wh_ether and how consolidation is to be carried out in the 
following cases: 
where, in the opinion of the competent authorities, a credit institution 
exercises a significant influence over one or more credit institutions or 
financial institutions, but without holding a participation or other 
capital ties in these institutions, 
where two or more credit institutions or financial institutions are placed 
under single management other than pursuant to a contract or clauses 
of their memoranda or articles of association, 
where two or more · credit institutions or financial institutions have 
administrative, management or supervisory bodies with the same 
persons constituting a majority. 
In particular, the competent authorities may permit, or require use of, the 
method provided for in Article 12 of Directive 83/349/EEC. That method 
shall not, however, constitute inclusion of the undertakings concerned in 
consolidated supervision. 
5. Where consolidated supervision is required pursuant to Article 52 (1) and 
(2), ancillary banking services undertakings shall be included in 
consolidations in the cases, and in accordance with the methods laid down in 
paragraphs I to 4 of this Article. 
Article 55 
Information to be supplied by mixed-activity 
holding companies and their subsidiaries 
I. Pending further coordination of consolidation methods, Member States 
shall provide that, where the parent undertaking of one or more credit 
institutions is a mixed-activity holding company, the competent authorities 
responsible for the authorization and supervision of those credit institutions 
shall, by approaching the mixed-activity holding company and its 
subsidiaries either directly or via credit institution subsidiaries, require them 
to supply any information which would be relevant for the purposes of 
supervising the credit institution subsidiaries. 
2. Member States shall provide that their competent authorities may carry 
out, or have carried out by external inspectors, on-the-spot inspections to 
verify information received from mixed-activity holding companies and their 
subsidiaries. If the mixed-activity holding company or one of its subsidiaries 
is an insurance undertaking, the procedure laid down in Article 56 (4) may 
also be us~d. If a mixed-activity holding company or one of its subsidiaries is 
situated in a Member State other than that in which the credit institution 
subsidiary is situated, on-the-spot verification of information shall be carried 
out in accordance with the procedure laid down in Article 56 (7). 
71 92/30/EEC 
Article 5 
92/30/EEC 
Article 6 
Article 56 
Measures to facilitate supervision on a consolidated basis 
1. Member States shall take the necessary steps to ensure that there are no 
legal impediments preventing the undertakings included within the scope of 
supervision on a consolidated basis, mixed-activity holding companies and 
their subsidiaries, or subsidiaries of the kind covered in Aiticle 52 { 10), from 
exchanging amongst themselves any infonnation which would be relevant 
for the purposes of supervision in accordance with Articles 52 to 'SS and this 
Article. 
2. Where a parent undertaking and any of its subsidiaries that are credit 
institutions are situated in different Member States, the competent authorities 
of each Member State shall communicate to each other all relevant 
infonnation which may allow or aid the exercise of supervision on a 
consolidated basis. 
Where the competent authorities of the Member State in which a parent 
undertaking is situated do not themselves exercise supervision on a 
consolidated basis pursuant to Article 53, they may be invited by the 
competent au~horities responsible for exercising such supervision to ask the 
parent undertaking for any infonnation which would be relevant for the 
purposes of supervision on a consolidated basis and to transmit it to these 
.. authorities. 
3. Member States shall authorize the exchange between their competent 
authorities of the information referred to in paragraph 2, on the 
understanding that, in the case of financial holding companies, financial 
institutions or ancillary banking services undertakings, the collection or 
possession of information shall not in any way imply that the competent 
authorities are required to play a supervisory role in relation to those 
institutions or undertakings standing alone. 
Similarly, Member States shall authorize their competent authorities to 
exchange the information referred to in Article SS on the understanding that 
the collection or possession of information does not in any way imply that 
the competent authorities play a supervisory role in relation to the mixed­
activity holding company and those of its subsidiaries which are not credit 
institutions, or to subsidiaries of the kind c~vered in Article 52 ( 10). 
4. Where a credit institution, financial holding company or a mixed-activity 
holding company controls one or more subsidiaries which are insurance 
companies or other undertakings providing investment services which are 
subject to authorization, the competent authorities and the authorities 
entrusted with the public task of supervising insurance undertakings or those 
other undertakings providing investment services shall cooperate closely. 
Without prejudice to their respective responsibilities, those authorities shall 
provide one another with any information likely to simplify their task and to 
allow supervision of the activity and overall financial situation of the 
undertakings they supervise. 
72 92/30/EEC 
Article 7 
(adapted) 
5. Infonnation received, in the fnmework of supervision on a 
consolidated basis, and in particular any exchange of inf onnation between 
competent authorities which is provided for in this Directive, shall be 
subject to the obligation of professional secrecy defined in Article JO. __ 
6. The competent authorities responsible for supervision on a consolidated 
basis shall establish lists of the financial holding companies referred to in 
Article 52 (2). Those lists shall be communicated to the competent. 
authorities of the other Member States and to the Commission. 
7. Where, in applying this Directive, the competent authorities of one 
Member State wish in specific cases to verify the information concerning a 
credit institution, a financial holding company, a financial institution, an 
ancillary banking services undertaking, a mixed-activity holding company, a 
subsidiary of the kind covered in Article SS or a subsidiary of the kind 
covered in Article 52 (10), situated in another Member State, they must ask 
the competent authorities of that other Member State to have that 
verification carried out. The authorities which receive such a request must, 
within the framework of their competence, act upon it either by carcying out 
the verification themselves, by allowing the authorities who made the 
request to carry it out, or by allowing an auditor or expert to carry it out. 
8. Without prejudice to their provisions of criminal law, Member States 
shall ensure that penalties or measures aimed at ending observed breaches 
or the causes of such breaches may be imposed on financial holding 
companies and mixed-activity holding companies, or their effective 
managers, that infringe laws, regulations or administrative provisions 
enacted to implement Articles 52 to SS and this Article. In certain cases, 
such measures may require the intervention of the courts. The competent 
authorities shall cooperate closely to ensure that the abovementioned 
penalties or measures produce the desired results, especially when the 
central administration or main establishment of a financial holding company 
or of a mixed-activity holding company is not located at its head office. ' . 
TITLE VI 
BANKING ADVISORY COMMITTEE 
Article 57 
Composition and tasks of the Banking Advisory Committee 
1. A Banking Advisory Committee of the competent authorities of the 
Member States _ shall be set up alongside the Commission. 
2. The tasks of the Banking Advisory Committee shall be to assist the 
Commission in ensuring the proper implementation of this Directive. 
___ Further it shall carry out the other tasks prescribed by this Directive 
and shall assist the Commission in the preparation of new proposals to the 
Council concerning further coordination in the sphere of credit institutions. 
73 92/30/EEC 
Article 7 
(adapted) 
77n80/EEC 
Article 11 
(adapted) 
3. The Banking Advisory Committee shall not concern itself with concrete 
problems relating to individual credit institutions. 
4. The Banking Advisory Committee shall be composed of not more than 
three representatives from each Member State and from the Commission. 
These representatives may be accompanied by advisers from time to time 
and subject to the prior agreement of the Committee. The Committee may 
also invite qualified persons and experts to participate in its meetings. The 
secretariat shall be provided by the Commission. 
5. The Banking Advisory Committee shall __ adopt its rules of 
procedure and elect a chairman from among the representatives of Member 
States. It shall meet at regular intervals and whenever the situation 
demands. The Commission may ask the Committee to hold an emergency 
meeting if it considers that the situation so requires. 
6. The Banking Advisory Committee's discussions and the outcome 
thereof shall be confidential except when the Committee decides otherwise. 
Article 58 
Examination of the requirements for authorization 
The Banking Advisory Committee shall examine the content given by the 
competent authorities to requirements listed in Articles 5 (1) and 6 (1), any 
other requirements which the Member States apply and the information 
which must be included in the programme of operations, and shall, where 
appropriate, make suggestions to the Commission with a view to a more 
detailed coordination. 
Article 59 
Observation ratios 
I. Pending subsequent coordination, the competent authorities shall, for 
the purposes of observation and, if necessary, in addition to such coefficients 
as may be applied by them, establish ratios between the various assets 
and/or liabilities of credit institutions with a view to monitoring their 
solvency and liquidity and the other measures which may serve to ensure 
that savings are protected. 
To this end, the Banking Advisory Committee shall decide on the content of 
the various factors of the observation ratios referred to in the first 
subparagraph and lay down the method to be applied in calculating them. 
74 77n80/EEC 
Article 11 
(adapted) 
77/780/EEC 
Article 3 (5) 
(adapted) 
' . 
77/780/EEC 
Article 6 
(adapted) 
Where appropriate, the Banking Advisory Committee shall be guided by 
technical consultations between the supervisory authorities of the categories 
of institutions concerned. 
2. The observation ratios established in pursuance of paragraph 1 shall be 
calculated at least every six months. 
3. The Banking Advisory Committee shall examine the results of analyses 
carried out by the supervisory authorities referred to in the third 
subparagraph of paragraph 1 on the basis of the calculations referred to in 
paragraph 2. 
4. The Banking Advisory Committee may make suggestions to the 
Commission with a view to coordinating the coefficients applicable in the 
Member States. 
TITLE VII 
POWERS OF EXECUTION 
Article 60 
Technical adaptations 
I. Without prejudice, regarding own funds, to the report referred to in 
the second subparagraph of Article 34 (3), the technical adaptations in the 
following areas shall be adopted in accordance with the procedure laid down 
in paragraph 2: 
clarification of the definitions in order to take account in the 
application of this Directive of developments on financial markets, 
clarification of the definitions to ensure uniform application of this 
Directive in the Community, 
the alignment of terminology on and the framing of definitions in . 
accordance with subsequent acts on credit institutions and related 
matters, 
the definition of 'Zone A' in point (14) of Article 1, 
the definition of 'multilateral development banks' in point (19) of 
Article 1, 
alteration of the amount of initial capital prescribed in Article S to 
take account of developments in the economic and monetary field, 
expansion of the content of the list referred to in Articles 18 and 19 
and set out in Annex I or adaptation of the terminology used in that 
list to take account of developments on financial markets, 
the areas in which the competent authorities must exchange 
information as listed in Article 28, 
75 77/780/EEC 
Article 6 
(adapted) 
89/299/EEC 
J\rticle 8 
(as amended by 92/16/EEC, 
Article 1 (2)) 
(adapted) 
89/646/EEC 
Article 22 
(adapted) 
89/647/EEC 
Article 9 
(adapted) 
92/121/EEC 
Article 7 
(adapted) 
amendment of the definitions of the assets listed in Article 43 in 
order to take account of developments on financial markets, 
the list of classification of off-balance-sheet items in Annexes II and 
IV and their treatment in the calculation of the ratio as described in 
Articles 42, 43 and 44 and Annex III, 
a temporary reduction in the minimum ratio prescribed in Article 47 
or the weighting prescribed in Article 43 in order to take account of 
specific circumstances, 
clarification of exemptions provided for in Article 49 (5) to ( I 0). 
2. The Commission shall be assisted by a committee composed of 
representatives of the Member States and chaired by a representative of the 
Commission. 
The Commission representative shall submit to the committ~e a draft of the 
measures to be taken. The committee shall deliver its opinion on the draft 
within a time limit which the chairman may lay down according to the 
urgency of the matter. The opinion shall be delivered by the majority laid 
down in Article 148 (2) of the Treaty in the case of decisions which the 
Council is required to adopt on a proposal from the Commission. The votes 
of the representatives of the Member States in the committee shall be 
weighted in the manner set out in that Article. The chairman shall not vote. 
The Commission shall adopt the measures envisaged if they. are in 
accordance with the opinion of the committee. 
If the measures envisaged are not in accordance with the opinion of the 
committee, or if no opinion is delivered, the Commission shall, without 
delay, submit to the Council a proposal concerning the measures to be taken. 
The Council shall act by a qualified majority. 
If, on the expiry of a period of three months from the date of referral to the 
Council, the Council has not acted, the proposed measures shall be adopted 
by the Commission, saYe where the Council has decided against the said 
measures by a simple majority. 
TITLE VIII 
TRANSITIONAL AND FINAL PROVISIONS 
Chapter 1 
Transitional provisions 
Article 61 
Transitional provisions regarding Article 36 
Denmark may allow its mortgage credit institutions organized as cooperative 
societies or funds before I January 1990 and converted into public limited 
liability companies to continue to include joint and several commitments of 
members, or of borrowers as referred to in Article 36 (I) claims on whom are 
treated in the same way as such joint and several commitments, in their own 
funds, subject to the following limits: 
76 89/299/EEC 
Article 8 
(as amended by 92/16/EEC, 
Article l (2)) 
(adapted) 
89/646/EEC 
Article 22 
(adapted) 
89/647/EEC 
Article 9 
(adapted) 
92/121/EEC 
Article 7 
(adapted) 
89/299/EEC 
Article 4a 
(as amended by 92/16/EEC, 
Article 1) 
(a) the basis for calculation of the part of joint and several commitments of 
borrowers shall be the total of the items referred to in Article 34 (2), 
points 1 and 2, minus those referred to in Article 34 (2), points 9, I 0 and 
11; 
(b) the basis for calculation on I January 1991 or, if converted at a later date, 
on the date of conversion, shall be the maximum basis for calculation. 
The basis for calculation may never exceed the maximum basis for 
calculation; 
(c) the maximum basis for calculation shall, from 1 January 1997, be 
reduced by half of the proceeds from any issue of new capital, as defined 
in point 1 of Article 34 (2), made after that date; and 
(d) the maximum amount of joint and several commitments of borrowers to 
be included as own funds must never exceed: 
50 % in 1991 and 1992, 
45 % in 1993 and 1994, · 
40 % in 1995 and 1996, 
35 % in 1997, 
30 % in 1998, 
20 % in 1999, 
10 % in 2000, and 
0 % after 1 January 2001, 
of the basis for calculation. 
Article 62 
Transitional provisions regarding Article 43 
1. Member States may apply a 50 % weighting to property leasing 
transactions concluded no later than 1 January 2001 concerning assets for 
business use situated in the country of the head office and governed by 
statutory provisions whereby the lessor retains full ownership of the rented 
asset until the tenant exercises his option to purchase. 
77 89/299/EEC 
Article 4a 
(as amended by 92/16/EEC, 
Article 1) 
89/647/EEC 
Article 11 (5) 
2. Article 43 (3) shall not affect the competent authorities' recognition of 
bilateral contracts for novation concluded concerning: 
Belgium, before 23 April 1996 
Denmark, before 1 June 1996 
Germany, before 30 October 1996 
Greece, before 27 March 1997 
Spain, before 7 January 1997 
France, before 30 May 1996 
Ireland, before 27 June 1996 
Italy, before 30 July i 996 
Luxembourg, before 29 May 1996 
The Netherlands, before 1 July 1996 
Austria, before 30 December 1996 
Portugal, before 15 January 1997 
Finland, before 21 August 1996 
Sweden, before 1 June 1996 
United Kingdom, before 30 April 1996 
Article 63 
Transitional provisions regarding Article 47 
1. A credit institution the minimum ratio of which has not reached the 8 % 
prescribed in Article 47 (1), on 1 January 1991, must gradually approach 
that level by successive stages. It may not allow the ratio to fall below the 
level reached before that objective has been attained. Any fluctuation should 
be temporary and the competent authorities should be apprised of the reasons 
for it. 
2. For not more than five years after 1 January 1993, the Member States 
may fix a weighting of 10 % for the bonds defined in Article 22 (4) of 
Directive 85/611/EEC and maintain it for credit institutions when and 
if they consider it necessary, to avoid grave disturbances in the operation of 
their markets. Such exceptions shall be reported to the Commission. 
3. For not more than seven years after 1 January 1993, Article 47 (1) shall 
not apply to the Agricultural Bank of Greece. However, the latter must 
approach the level prescribed in Article 47 (1) by successive stages according 
to the method described in paragraph l of this Article. 
Article 64 
Transitional provisions regarding Article 49 
1. If, on 5 February 1993, ____ a credit institution had already 
incurred an exposure or exposures exceeding either the large exposure limit 
or the aggregate large exposure limit laid down in Article 49, the competent 
authorities shall require the credit institution concerned to take steps to have 
that exposure or those exposures brought within the limits laid down. in 
Article 49. 
2. The process of having such an exposure or exposures brought within 
authorized limits shall be devised, adopted, implemented and compl~ted 
within the period which the competent authorities consider consistent with 
the principle of sound administration and fair competition. The competent 
authorities shall inform the Commission and the Banking Advisory 
Committee of the schedule for the general process adopted. 
3. A credit institution may not take any measure which would cause the 
exposures referred to in paragraph 1 to exceed their level on 5 February 
1993. ___ _ 
78 96/10/EC 
Article 2 
(adapted) 
89/647/EEC 
Article 11 (1) to (3) 
(adapted) 
92/121/EEC 
Article 6 
(adapted) 
4. The period applicable under paragraph 2 shall expire no later than 31 
December 2001. Exposures with a longer maturity, for which the lending 
institution is bound to observe the contractual terms, may be continued until 
their maturity. 
5. Until 31 December 1998, Member States may increase the limit laid 
down in Article 49 (1) to 40 % and the limit laid down in Article 49 (2) to 30 
%. In such cases and subject to paragraphs 1 to 4, the time limit for bringing 
the exposures existing at the end of this period within the limits laid down in 
Article 49 shall expire on 31 December 2001. 
6. In the case of credit institutions the own funds of which do not 
exceed ECU 7 million, and only in the case of such institutions, Member 
States may extend the time limits laid down in paragraph 5 by five years. 
Member States that avail themselves of the option provided for in this 
paragraph shall take steps to prevent distortions of competition and shall 
inform the Commission and the Banking Advisory Committee thereof. 
7. In the cases referred to in paragraphs 5 and 6, an exposure may be 
considered a large exposure if its value is equal to or exceeds 15 % of own 
funds. 
8. Until 31 December 2001 Member States may substitute a frequency of at 
least twice a year for the frequency of notification of large exposures referred 
to in the second indent of Article 48 (2). 
9. Member States may fully or partially exempt from the application of 
Article 49 (1 ), (2) and (3) exposures incurred by a credit institution 
consisting of mortgage loans as defined in Article 62 (1) concluded before 1 
January 2002 as well as property leasing transactions as defined in Article 
62 (2) concluded before 1 January 2002, in both cases up to 50 % of the 
value of the property concerned. 
The same treatment applies t'o loans secured, to the satisfaction of the 
competent authorities, by shares in Finnish residential housing companies, 
operating in accordance with the Finnish Housing Company Act of 1991 or 
subsequent equivalent legislation which are similar to the mortgage loans 
referred to in the first subparagraph. 
10. Without prejudice to paragraph 4, Portugal may be, until 31 December 
1998, fully or partially exempt from the application of Article 49 ( 1) and (3) 
exposures incurred by a credit institution to 'Electricidade de Portugal' 
(EDP) and Petrogal. 
79 92/121/EEC 
Article 6 
(adapted) 
as amended by 9S/1/EC, Euratom, 
ECSC, 
Annex I, point XI, B, III, (3) (b) 
92/121/EEC 
Article 6 
(adapted) 
Article 65 
Transitional provisions regarding Article 51 
Credit institutions which, on 1 January 1993, exceeded the limits laid 
down in Articles 51 (1) and (2) shall have until 1 January 2003 __ to 
comply with them. 
Chapter 2 
Final provisions 
Article 66 
Repealed Directives 
1. Directives 73/183/EEC, 77/780/EEC, 89/299/EEC, 89/646/EEC, 
89/647/EEC, 92/30/EEC and 92/121/EEC, as amended by the Directives 
set out in in Annex V, Part A, are hereby repealed without prejudice to 
the obligations of the Member States concerning the deadlines for 
transposition of the said Directives listed in Annex V, Part B. 
2. References to the repealed Directives shall be construed as references 
to this Directive and should be read in accordance with the correlation 
table in Annex VI. 
Article 67 
Implementation 
This Directive shall enter into force on the twentieth day following that 
of its publication in the Official Journal of the European Communities. 
Article 68 
Addressees 
This Directive is addressed to the Member States. 
Done at Brussels, 
For the European Parliament, 
The President 
80 89/646/EEC 
Article 12 (7) 
(adapted) 
For the Counci~ 
The President 
ANNEX I 
LIST OF ACTIVITIES SUBJECT TO MUTUAL RECOGNITION 
1. Acceptance of deposits and other repayable funds. 
2. Lending (I). 
3. Financial leasing. 
4. Money transmission services. 
5. Issuing and administering means of payment (e.g. credit cards, travellers' cheques and bankers' drafts). 
6. Guarantees and commitments. 
7. Trading for own account or for account of customers in: 
(a) money market instruments (cheques, bills, CDs, etc.); 
(b) foreign exchange; 
( c) financial futures and options; 
( d) exchange and interest rate instruments; 
( e) transferable securities. 
8. Participation in securities issues and the provision of services related to such issues. 
9. Advice to undertakings on capital structure, industrial strategy and related questions and advice as well as 
services relating to mergers and the purchase of undertakings. 
10. Money broking. 
11. Portfolio management and advice. 
12. Safekeeping and administration of securities. 
13. Credit reference services. 
14. Safe custody services. 
(1) Including inter alia: 
-consumer credit, 
-mortgage credit, 
-factoring, with or without recourse, 
-financing of commercial transactions (including forfeiting). 
81 89/646/EEC 
Annex 
Corrigendum 
(OJNoL311, 
14.11.1997, 
p. 34) 
Corrigendum 
(OJNoL83, 
30.3.1990, 
p. 128) 
ANNEX II 
CLASSIFICATION OF OFF-BALANCE-SHEET ITEMS 
Full risk 
-Guarantees having the character of credit substitutes, 
-Acceptances, 
-Endorsements on bills not bearing the name of another credit institution, 
-Transactions with recourse, 
-Irrevocable standby letters of credit having the character of credit substitutes, 
-Assets purchased under outright forward purchase agreements, 
-Forward forward deposits, 
-The unpaid portion of partly-paid shares and securities, 
-Other items also carrying full risk. 
Medium risk 
-Documentary credits issued and confirmed (see also medium/low risk); 
-Warranties and indemnities (including tender, performance, customs and tax bonds) and guarantees not having the 
character of credit substitutes, · 
-Asset sale and repurchase agreements as defined in Article 12 (3) and (5) of Directive 86/635/EEC, 
' ' . 
-Irrevocable standby letters of credit not having the character of credit substitutes, 
-Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with 
an original maturity of more than one year, 
-Note issuance facilities (NIFs) and revolving unde1writing facilities (RUFs), 
-Other items also carrying medium risk. 
Medium/low risk 
-Documentary credits in which underlying shipment acts as collateral and other self-liquidating transactions, 
-Other items also carrying medium/low risk. 
Low risk 
-Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with 
an original maturity of up to and including one year or which may be cancelled unconditionally at any time -
without notice, 
-Other items also carrying low risk. 
The Member States undertake to inform the Commission as soon as they have agreed to include a new off-balance­
sheet item in any of the 1::i.st indents under each category of risk. Such items will be definitively classified at 
Community level once the procedure laid down in Article 60 has been completed. 
82 89/647/EEC 
Annex I 
(adapted) 
ANNEX III 
THE TREATMENT OF OFF-BALANCE-SHEET ITEMS CONCERNING INTEREST 
AND FOREIGN- EXCHANGE RA TES 
1. SCOPE AND CHOICE OF METHOD 
Subject to the consent of their supervisory authorities, credit institutions may choose one of the methods set out 
below to measure the risks associated with the transactions listed in Annex IV. Interest-rate and foreign-exchange 
contracts traded on recognized exchanges where they are subject to daily margin requirements and foreign-exchange 
contracts with an original maturity of fourteen calendar days or less are excluded. 
2. METHODS 
Method 1: the 'mark to market' approach 
Step (a): by attaching current market values to contracts (mark to market) the current replacement cost of all 
contracts with positjve values is obtained. 
Step (b): to obtain a figure for potential future credit exposure(}), the notional principal amounts or underlying 
values are multiplied by the following percentages: 
TABLE 1 
Residual maturity Interest-rate contracts Foreign-exchange contracts 
One year or less 0% \ 1% 
More than one year 0,5 % 5% 
Step (c): the sum of current replacement cost and potential future credit exposure is multiplied by the risk 
weightings allocated to the relevant counterparties in Article 43. 
Method 2: the 'original exposure' approach 
Step (a): the notional principal amount of each instrument is multiplied by the percentages given below: 
TABLE2 
Original maturityl1J Interest-rate contracts Foreign-exchange contracts 
One year or less 0,5% 2% 
More than one year but not 1% 5% 
exceeding two years 
Additional allowance for each 1% 3% 
additional year 
l 1 J In the case of interest-rate contracts credit institutions ma y, sub· ect to the consent of their corn p etent 
authorities, choose either original or residual maturity. 
Step (b): the original exposure thus obtained is multiplied by the risk weightings allocated to the relevant 
counterparties in Article 43. 
3. CONTRACTUAL NETTING (CONTRACTS FOR NOV A TION AND OTHER NETTING AGREEMENTS) 
(a) Types of netting that competent authorities may recognize 
For the purpose of this point 3 'counterparty' means any entity (including natural persons) that has the power to 
conclude a contractual netting agreement. 89/647/EEC 
Annex II 
(as amended b 
96/10/EC, 
Article 1) 
(1) Except in the case of single-currency 'floating/floating' interest rate swaps in which only the current replacement cost will be calculated. 
83 
The competent authorities may recognize as risk-reducing the following types of contractual netting: 
(i) bilateral contracts for novation between a credit institution and its counterparty under which mutual claims 
and obligations are automatically amalgamated in such a way that this novation fixes one single net amount 
each time novation applies and thus create a legally binding, single new contract extinguishing former 
contracts; 
(ii) other bilateral agreements between a credit institution and its counterparty. 
(b) Conditions for recognition 
The competent authorities may recognize contractual netting as risk-reducing only under the following 
conditions: 
(i) a credit institution must have a contractual netting agreement with its counterparty which creates a single 
legal obligation, covering all included transactions, such that, in the event of a counterparty's failure to 
perform owing to default, bankruptcy, liquidation or any other similar circumstance, the credit institution 
would have a claim to receive or an obligation to pay only the net sum of the positive and negative mark­
to-market values of included individual transactions; 
(ii) a credit institution must have made available to the competent authorities written and reasoned legal 
opinions to the effect that, in the event of a legal challenge, the relevant courts and administrative 
authorities would, in the cases described under (i), find that the credit institution's claims and obligations 
would be limited to the net sum, as described in (i), under: 
the law of the jurisdiction in which the counterparty is incorporated and, if a foreign branch of an 
undertaking is involved, also under the law of the jurisdiction in which the branch is located, 
the law that governs the individual transactions included, and 
the law that governs any contract or agreement necessary to effect the contra~tual netting.; 
(iii) a credit institution must have procedures in place to ensure that the legal validity of its contractual netting 
is kept under review in the light of possible changes in the relevant laws. 
The competent authorities must be satisfied, if necessary after consulting the other competent authorities 
concerned, that the contractual netting is legally valid under the law of each of the relevant jurisdictions. If any 
of the competent authorities is not satisfied in that respect, the contractual netting agreement will not be 
recognised as risk-reducing for either of the counterparties. 
The competent authorities may accept reasoned legal opinions drawn up by types of contractual netting. 
No contract containing a provision which permits a non-defaulting counterparty to make limited payments only, 
or no payments at all, to the estate of the defaulter, even if the defaulter is a net creditor (a 'walkaway' clause), 
may be recognized as risk-reducing. 
84 89/647/EEC 
Annex II 
(as ame.nded b 
96/10/EC, 
Article 1) 
(c) Effects of recognition 
(i) Contracts for novation 
The single net amounts fixed by contracts for novation, rather than the gross amounts involved, may be 
weighted. Thus, in the application of Method I, in 
Step (a): the current replacement cost, and in 
Step (b): the notional principal amounts or underlying values 
may be obtained taking account of the contract for novation. In the application of Method 2, in Step (a) the 
notional principal amount may be calculated taking account of the contract for novation; the percentages of 
Table 2 must apply. 
(ii) Other netting agreements 
In the application of Method I, in Step (a) the current replacement cost for the contracts included in a 
netting agreement may be obtained by taking account of the current hypothetical net replacement cost which 
results from the agreement. In Step (b) the single net amounts may be taken into account only for forward 
foreign-exchange contracts and other similar contracts, in which notional principal is equivalent to cash 
flows, in cases where the amounts to be claimed or delivered fall due on the same value date and in the same 
currency. 
Jn the application of Method 2, in Step (a) 
-for forward foreign-exchange contracts and other similar contracts, in which notional principal is 
equivalent to cash flows, in cases where the amounts to be claimed or delivered fall due on the same 
value date and in the same currency, the notional principal amount may be calculated taking account of 
the netting agreement; to all these contracts Table 2 must apply, 
-for all other contracts included in a netting agreement, the percentages applicable may be reduced as 
indicated in Table 3: 
TABLE3 
Original maturityl I J Interest-rate contracts Foreign-exchange contracts 
One year or less 0,35 % 1,50 % 
More than one year but not more 0,75 % 3,75 % 
than two years 
Additional allowance for each 0,75 % 2,25 % 
additional year 
l 1 J In the case of interest-rate contracts credit institutions ma y, sub· ect to the consent of their corn etent p 
authorities, choose either original or residual maturity. 
85 89/647/EEC 
Annex II 
(as amended b 
96/10/EC, 
Article 1) 
ANNEX IV 
TYPES OF OFF-BALANCE-SHEET ITEMS CONCERNING INTEREST RA TES 
AND FOREIGN EXCHANGE 
Interest-rate contracts 
-Single-currency interest rate swaps, 
-Basis swaps, 
-Forward-rate agreements, 
-Interest-rate futures, 
-Interest-rate options purchased, 
-Other contracts of a similar nature. 
Foreign-exchange contracts 
-Cross-currency interest-rate swaps, 
-Forward foreign-exchange contracts, 
-Currency futures, 
-Currency options purchased, 
-Other contracts of a similar nature. 
86 89/647/EEC 
Annex Ill 
Council Directive 73/183/EEC 
Council Directive 77/780/EEC 
-Council Directive 85/345/EEC 
-Council Directive 86/137/EEC 
-Council Directive 86/524/EEC 
-Council Directive 89/646/EEC ANNEXV 
PARTA 
Repealed Directives 
together with their successive amendments 
(referred to in Article 66) 
,( 
/ 
-European Parliament and Council Directive 95/26/EC, 
only Article l, first indent, article 2 ( l ), first indent, Article 3 (2), Article 4 (2), 
(3) and (4) -as regards references to Directive 77/780/EEC -and (6), and Article 5, 
first indent. 
-Council Directive 96/13/EC 
Council Directive 89/299/EEC 
-Council Directive 91/633/EEC 
-Council Directive 92/16/EEC 
-Council Directive 92/30/EEC 
Council Directive 89/646/EEC 
-Council Directive 92/30/EEC 
-European Parliament and Council Directive 95/26/EC 
only Article I, l st indent. 
Council Directive 89/64 7 ,EEC 
-Commission Directive 91/31/EEC 
-Council Directi\'e 92/30/EEC 
-Commission Directive 94/7/EC 
-Commission Directive 95/15/EC 
-Commission Directive 95/67/EC 
-European Parliament and Council Directive 96/10/EC 
Council Directive 92/30/EEC 
Council Directive 92/121/EEC 
87 
ANNEXV 
PAllT B 
DEADLINES FOR IMPLEMENTATION 
Directive 
73/183/EEC (OJ No L 194, 16.7.1973, p.l) 
77/780(EEC (OJ No L 322, 17. 12. 1977, p. 30) 
85/345/EEC (OJ No L 183, 16. 7. 1985, p. 19) 
86/137/EEC (OJ No L 106, 23. 4. 1986, p. 35) 
86/524/EEC (OJ No L 309, 4. 11. 1986, p. 15) 
89/299/EEC (OJ No L 124, 5.5.1989, p. 16) 
89/646/EEC (OJ No L 386, 30. 12. 1989, p. 1) 
89/647/EEC(OJNoL386,30.12.1989,p.14) 
91/31/EEC(OJNoL 17,23.1.1991,p.20) 
91/633/EEC (OJ No L 339, 11.12.1991, p. 16) 
92/16/EEC (OJ No L 75, 31. 3. 1992, p. 48) 
92/30/EEC (OJ No L 110, 28. 4. 1992, p. 52) 
92/121/EEC (OJ No L 29, 5.2.1993, p. 1) 
• 94/7/EC (OJ No L 89, 6. 4. 1994, p. 17) 
95/15/EC (OJ No L 125, 8.6.1995, p. 23) 
95/26/EC (OJ No L 168, 18.7.1995, p. 7) 
95/67/EC(OJNoL314,28.12.1995,p. 72) 
96/10/EC (OJ No L 85, 3. 4. 1996, p. 17) 
96/13/EC (OJ No L 66, 16. 3. 1996, p. 15) (referred to in Article 66) 
Article 6 (2), 
other provisions Deadline for implementation 
2. 1.1975(l) 
15. 12. 1979 
15.7.1985 
31.12.1986 
l. I. 1993 
I. I. 1990 
1. I. 1993 
1.1.1991 
31. 3. 1991 
31.12.1992 
31. 12. 1992 
31. 12. 1992 
31. 12. 1993 
25. 11. 1994 
30. 9. 1995 
18.7.1996 
1.7.1996 
30.6. 1996 
15.4.1996 
(I) However, as regards the abolition of the restriction referred to in Article 3 (2) (g), the Netherlands was allowed to defer implementation until 
2.7 .1977.(Ref: Article 8, second subparagraph of Directive 73/183/EEC). 
88 
This Directive Dir. 77/780/EEC Dir. 89/299/EEC 
Article l ( l) Article 1, 1st indent 
Article I (2) Article l, 2nd indent 
Article 1 (3) 
Article I (4) to (8) 
Article I (9) 
Article l (10) and (l l) 
Article l (12) 
Article l (13) 
Article l (14) to (17) 
Article 1 (18) to (20) 
Article I (2l)to(23) 
Article I (24) 
Article l (25) 
Article l (26) Article l, 5th indent 
Article 2 (l) Article 2 (l) 
Article 2 (2) 
Article 2 (3) Article 2 (2) 
Article 2 ( 4) Article 2 (3) 
Article 2 (5), l st, 2nd and Article 2 (4) (a), (b) and (c) 
3rd subparagraphs 
Article 2 (6) 
Article 3 
Article 4 Article 3 (I) 
Article 5 ( l ), l st subpara. Article 3 (2), l st subpara. 
Article 5 ( l ), 2nd subpara. Article l 0 (I), 3rd subpara. 
Article 5 (2) 
Article 5 (3) to (7) 
Article 6 (I) Article 3 (2), 1st subpara., 
3rd indent and 2nd subpara. 
Article 6 (2) Article 3 (2)a 
Article 7 (I) and (2) 
Article 7 (3) Article 3 (2) 3rd, 4th and 
5th subparas. 
Article 8 Article 3 (4) 
Article 9 Article 3 (3) (a) 
Article 10 Article 3 (6) 
Article 11 Article 3 (7) ANNEX VI 
CORRELATION TABLE 
Dir. 89/646/EEC Dir. 89/647/EEC 
Article l (3) 
Article I (5) to (9) 
Article I (I 0) and ( 11) 
Artide I ( 12) 
Article I ( 13) 
Article 2 (I), 2nd to 5th indents 
Article 2 (1 ), 6th to 8th indents 
Article 2 (I) Article I (1) 
Article 2 (3) Article l (3) 
Article 3 
Article 4 (2) 
Article 10 (I) to (5) 
Article l (10), 2nd subpara. 
and Article 5 ( l) and (2) 
89 Dir. 92/30/EEC Dir. 92/121/EEC Dir. 96/10/EC 
Article I, I st indent Article 1 (a) 
Article 1, 6th indent 
Article I, 7th indent Article I (c) 
Article I , 8th indent Article I (d) 
Article 1, 3rd to 5th indents 
Article l (h) 
Article I (m) 
Article 2 
Article 2 (2) (b) 
This Directive Dir. 77/780/EEC Dir. 89/299/EEC Dir. 89/646/EEC Dir. 89/647/EEC Dir. 92/30/EEC Dir. 92/121/EEC Dir. 96/10/EC Article 12 Article 7 
Article 13 Article 6 ( I ) 
Articlel4(1) Article 8 (I) 
Article 14 (2) Article 8 (5) 
Article 15 Article 5 
Article 16 ( 1) to (5) Article 11 (I) to (5) 
Article 16 (6) Article I ( 10), 2nd subpara. 
Article 17 Article 13 (2) 
Article 18 Article 18(1) 
Article 19 Article 18 (2) 
Article 20 (I) to (6) Article 19 
Article 20 (7) Article 23 (I) 
Article 21 ( 1} and (2) Article 20 
Article 21 (3) Article 23 (2) 
Article 22 Article 21 
Article 23 (I) Article 8 
Article 23 (2) to (7) Article 9 
Article 24 Article 9 
Article 25 Article 8 
Article 26 Article 13 (1) and (3) 
Article 27 Article 14 (2) 
Article 28 Article 7 (I) 
Article 29 Article 15 
Article JO (1) to (5) Article 12 (1) to (5) 
Article 30 (6) Article 12 (5a) 
Article 30 (7) Article 12 (5b) 
Article JO (8) Article 12 (6) 
Article 30 (9) Article 12 (7) 
Article JO (10) Article 12 (8) 
Article 31 Article 12a 
Article 32 Article 17 
Article 33 Article 13 
Article 34 (I) Article I {I) 
Article 34 (2) to (4) Article 2 (I) to (3) 
Article 35 Article 3 
Article 36 Article 4 
Article 37 Article 5 
Article 38 Article 6 (I) and (4) 
Article 39 Article 7 
Article 40 Article 3 (l)to (4), (7) and (8) 
Article 41 Article 4 
Article 42 Article 5 ; 
Article 43 Article 6 
Article 44 Article 7 
Article 45 Article 8 
Article 46 Article 2 (2) 
90 
This Directive Dir. 77/780/EEC Dir. 89/299/EEC Dir. 89/<>46/EE(' Dir. 89/647/EEC Dir. 92/30/EEC Dir. 92/121/EEC Dir. 96/10/EC 
Article 47 Article 10 
Article 48 Article 3 
Article 49 Article 4 
Article 50 Article 5 (1) to (3) 
Article5I (l}to(5) Article 12 (I) lo (5) 
Article5I (6) Article 12 (8) 
Article 52 ( 1) to (7) Article 3 ( 1) to (7) 
Article 52 (8) and (9) Article 3 (5) and (6) Article 3 (8) and (9) Article 5 (4) and (5) 
Article 52 (10) Article 3 ( I 0) 
Article 53 Article 4 
Article 54 Article 5 
Article 55 Article 6 
Article 56 Article 7 
Article 57 Article 11 
Article 58 Article 3 (5) 
Article 59 Article 6 
Article 60 Article 8 Article 22 Article 9 Article 7 
Article 61 Article 4a 
Article 62 (1) Article 11 (5) 
Article 2 Article 62 (2) 
Article 63 Article 11 (I) to (3) · 
Article 64 Article 6 
Article 65 Article I 2 (7) 
Article 66 --- --- --- --- --- --- -
Article 67 --- --- --- --- --- --- ---
Article 68 --- --- --- --- --- --- ---
Annex I Annex 
Annex II Annex I 
Annex Ill Annex lI 
Annex IV Annex Ill 
Annex V --- --- --- --- --- --- --
Annex VI --- --- --- --- --- --- ---
91 



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ISBN 92-78-29624-4 
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