PROPOSAL FOR A COUNCIL DIRECTIVE IMPLEMENTING DIRECTIVE 89/299/EEC ON THE OWN FUNDS OF CREDIT INSTITUTIONS
Date: 1991-07-26
Institutions: European Commission
Subjects: financial institution, financial policy, local legislation, mortgage bank

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

C0M(91)  284 

f i n al 

B r u s s e l s,  26  July  1991 

Proposal 

f or  a 

ÇQUNQL  DIRECTIVE 

i m p l e m e n t i ng  D i r e c t i ve  8 9 / 2 9 9 / E EC  on 

t he 

Own  Funds  of  c r e d it 

i n s t i t u t i o ns 

(presented  by  the  Commission) 

I-

EXPLANATORY  MEMORANDUM 

I •  G e n e r al 

1. 

On  17  A p r il  1 9 89  the  C o u n c il  a d o p t ed  the  O wn  F u n ds 

D i r e c t i ve  ( 8 9 / 2 9 9 / E E C)  and  e s t a b l i s h ed  the  d e f i n i t i on 

of  the  o wn  f u n ds  of  c r e d it  i n s t i t u t i o ns  i n c l u d i ng  the 

w ay  by  w h i ch  total  o wn  f u n ds  a re  to  be  c a l c u l a t e d.  W i th 

r e g a rd  to  the  "Fund  for  G e n e r al  B a n k i ng  R i s k s"  ( F G B R) 

t h e re  w as  no  final  a l l o c a t i o n.  A r t i c le  6 ( 2)  s t a t e s: 

" T he  item  r e f e r r ed  to  in  A r t i c le  2 ( 1 ) ( 4)  [ w h i ch  is  the 

F G B R] 

s h a ll 

c o n s t i t u te 

a 

s e p a r a te 

c a t e g o r y. 

P r o v i s i o n a l l y, 

it 

shall 

be 

i n c l u d ed 

in  o wn 

f u n ds 

w i t h o ut  l i m i t,  but  shall  not  be  i n c l u d ed  w h en  the  b a s is 

of  the  limit  for  the  items  r e f e r r ed  to  in  p o i n ts  3  and 

5 

to 

8 

is 

f i x e d. 

W i t h in 

six 

m o n t hs 

of 

the 

i m p l e m e n t a t i on  of  t h is  D i r e c t i ve  the  C o m m i s s i on  s h a l l, 

in 

a c c o r d a n ce 

w i th 

the 

p r o c e d u re 

p r o v i d ed 

for 

in 

A r t i c le  8,  p r o p o se  the  final  t r e a t m e nt  for  t h is  item 

e i t h er 

in  o r i g i n al 

o wn  f u n ds  or 

in  a d d i t i o n al 

o wn 

f u n d s ." 

2. 

T h e re  a re  s e v e r al  r e a s o ns  a r g u i ng  in  f a v o ur  of  d e c i d i ng 

the  final  a l l o c a t i on  of  the  "Fund  for  G e n e r al  B a n k i ng 

R i s k s" : 

- ?-

the  B a s le  C o m m i t t ee  on  B a n k i ng  R e g u l a t i o ns  d e c i d ed 

at  its  m e e t i ng  of  13  D e c e m b er  1990  to  i n c l u de  the 

FGBR  as  "Tier  O ne  C a p i t a l"  and  this  d e c i s i on  h as 

b e en  e n d o r s ed  by  the  C o m m i t t ee  of  C e n t r al 

B a nk 

G o v e r n o rs  of  the  G - 10  c o u n t r i e s.  T h e r e f o re 

t he 

" d i s c u s s i o ns  in  i n t e r n a t i o n al  f o r a"  h a ve  p r o d u c ed 

the  e x p e c t ed  r e s u lt  and  a  C o m m u n i ty  d e c i s i on  c an 

be  t a k en  h a v i ng  r e g a rd  and  in  c o n f o r m i ty  w i th  t he 

r e c o m m e n d ed 

t r e a t m e nt 

of 

such 

a m o u n ts 

at 

i n t e r n a t i o n al 

l e v e l.  T he  C o m m i s s i on 

p a r t i c i p a t ed 

fully 

in  t h e se  d i s c u s s i o ns  and 

is  in  c o m p l e te 

a g r e e m e nt 

w i th 

the 

c o n c l u s i o n s; 

the 

B a n k i ng 

A d v i s o ry  C o m m i t t ee  h as  a l so  c o n v e y ed  its  u n a n i m o us 

a p p r o v aI ; 

M e m b er  S t a t es  a re  at  p r e s e nt  t r a n s p o s i ng  the  O wn 

F u n ds  D i r e c t i ve  into  n a t i o n al  l e g i s l a t i on  and  t he 

b a n k i ng  c o m m u n i ty 

is  b e c o m i ng  f a m i l i ar  w i th  the 

new  r u l e s.  T h e r e f o re  it  is  e x p e d i e nt  to  r e a ch  a 

final  s o l u t i on  as  e a r ly  as  p o s s i b le  in  o r d er  to 

g i ve 

the 

r i g ht 

and 

d e f i n i t i ve 

i n f o r m a t i on 

to 

m a r k e t p l a y e r s; 

the  c a l c u l a t i on  of  the  S o l v e n cy  R a t io  as  well  as 

o t h er  p r u d e n t i al  y a r d s t i c ks  ( p a r t i c i p a t i o n s,  l a r ge 

e x p o s u r e s)  s h o u ld  be  d o ne  on  an  as  s t a b le  b a s is  as 

p o s s i b le 

and 

c h a n g es 

s h o u ld 

be  kept 

to 

t h o se 

r e a l ly  n e c e s s a r y,  e t c. 

For  ail  t h e se  r e a s o ns  the  FGBR  is  included  w i t h in  t he 

c a t e g o ry  of  " o r i g i n al 

o wn  f u n d s"  t o g e t h er  w i th 

t he 

o t h er  two  e l e m e n ts  " c a p i t a l"  and  " d i s c l o s ed  r e s e r v e s" 

("core 

c a p i t a l " ). 

T he 

FGBR 

s h o u ld 

h e n c e f o r th 

be 

i n c l u d ed 

w h en 

the 

b a s is 

of 

the 

limit 

for 

t he 

" a d d i t i o n al  o wn  f u n d s"  is  f i x ed  a c c o r d i ng  to  A r t i c le 

6 ( 1)  of  the  O wn  F u n ds  D i r e c t i v e. 

-h-

A l t h o u gh 

the  C o m m i s s i on 

h as  p r o p o s e d, 

by  w ay  of  a 

D i r e c t i ve 

a m e n d i ng 

the 

O wn 

F u n ds 

D i r e c t i ve 

the 

i n t r o d u c t i on  of  the  " C o m l t o l o gy  P r o c e d u r e"  in  A r t i c le  8 

of  the  s a id  D i r e c t i ve  it  is,  for  r e a s on  g i v en  u n d er 

p o i nt  2,  e x p e d i e nt  to  c o me  to  the  final  a l l o c a t i on  of 

the  FGBR  and  not  to  hold  up  that  d e c i s i on  u n t il  the 

p r o p o s ed 

a m e n d i ng 

D i r e c t i ve 

h as 

b e en 

a d o p t e d. 

T he 

P a r l i a m e nt  will  be  f u l ly  i n f o r m ed  on  t h is  m a t t e r. 

I I .  E x a m i n a t i on  of  the  a r t i c l es 

Art icle  1 . 1. 

T h is  a r t i c le  d e f i n i t i v e ly  i n c l u d es  in  a r t i c le  6 ( 1)  of  the 

O wn  F u n ds  D i r e c t i ve  the  "Fund  for  G e n e r al  B a n k i ng  R i s k s" 

t o g e t h er  w i th  the  o t h er  two  e l e m e n t s,  c a p i t al  and  d i s c l o s ed 

r e s e r v e s,  w i t h in  the  c a t e g o ry  of  o r i g i n al  o wn  f u n d s. 

Art icle  1.2 

T h is  a r t i c le  d e l e t es  a r t i c le  6 ( 2)  of  the  D i r e c t i ve  as  a 

r e s u lt  of  a r t i c le  1.1  b e f o re  c o m m e n t e d. 

Art icle  2 

T h is  a r t i c le  a s ks  the  M e m b er 

S t a t es 

first 

to  t a ke 

the 

m e a s u r es  n e c e s s a ry  to  c o m p ly  w i th  the  D i r e c t i ve  b e f o re  the 

1st  J a n u a ry  1 9 9 3,  s e c o nd  to  m a ke  e x p r e ss  r e f e r e n ce  to  t h is 

D i r e c t i ve  in  the  p r o v i s i o ns  a d o p t ed  and  t h i rd  to  c o m m u n i c a te 

s u ch  p r o v i s i o ns  to  the  C o m m i s s i o n. 

Art içle  3 

T h is  a r t i c le  m a k es  the  g e n e r al  r e f e r e n ce  that  the  D i r e c t i ve 

is  a d d r e s s ed  to  the  M e m b er  S t a t e s. 

-b  -

Proposal  for 

a Counc il D i rectIve 
implementing  Directive 89/299/EEC on the 
Own Funds of credit  institutions 

THE COUNCIL OF THE EUROPEAN  COMMUNITIES 

Having  regard  to  the  Council  Directive  89/299/EEC  of 
17 April  1989  on  the  own  funds  of  credit  institutions^1^ 
and  in particular  Articles 6(2) and 8 thereof; 

Having  regard  to the proposal  from  the Commission; 

Whereas  on  17 April  1989  the Council  adopted  the  Own  Funds 
Directive  (89/299/EEC) and established  the definition of the 
own  funds of  credit  institutions  including  the way  by which 
total  own  funds are  to be calculated; 

Whereas, with  regard  to the Fund  for General  Banking  Risk  in 
the  sense  of  Article  38  of  the  Council  Directive 
(86/635/EEC)  of  8  December  1986  on  the  annual  accounts  of 
institutions^2^  there  was  no  final 
other  financial 
allocation,  it states  in Article 6(2) of  the above mentioned 
Directive  that  within  six  months  of  the  date  of 
implementation  the  Commission  shall  propose  the  final 
treatment  of  the  Fund  for  General  Banking  Risk  either  in 
original  own  funds or  in additional  own  funds, in accordance 
with  the procedure  provided  for  in Article 8; 

Whereas having  regard  to the opinion of  the Banking  Advisory 
Committee  and  taking  into account  the results of  discussions 
in  international  fora  and  in  conformity  with  th-  treatment 
of  the  Fund  for  General  Banking  risks  at  international 
level,  these  are  included  within  the  category  of  original 
own funds. 

HAS ADOPTED  THIS DIRECTIVE: 
(1) OJ No L 124, 5.5.1989, p. 16 
(2) OJ No L 372, 31.12.1989, p. 1 

•6-

A r t l ç lo 1 

1.  Article  6(1)  of  Directive  89/299/EEC  is  hereby  replaced 

by  the  foI low i ng: 

"1.  The  items  referred  to  in  Article  2 ( 1 ), points  3  and 

5  to  8  shall  be  subject  to  the  following  limits: 

(a)  the  total  of  items  3  and  5  to  8  may  not  exceed 

a  maximum  of  100%  of  items  1  plus  2  and  4 

m i nus  9,  10  and  11 ; 

(b)  the  total  of  items  7  and  8  may  not  exceed  a 

maximum  of  5 0%  of  items  1  plus  2  and  4  minus 

9,  10  and  11 ; 

(c)  the  total  of  items  12  and  13  shall  be  deducted 

from  the  total  of  the  items. 

2.  Article  6(2)  of  Directive  89/299/EEC  is  deleted 

¥-

Article. 2 

1.  M e m b er 

S t a t es 

shall 

b r i ng 

into 

f o r ce 

the 

l a w s, 

r e g u l a t i o ns  and  a d m i n i s t r a t i ve  p r o v i s i o ns  n e c e s s a ry  to 

c o m p ly  w i th  this  D i r e c t i ve  not 

later  than  1  J a n u a ry 

1 9 9 3. 

2. 

W h en  M e m b er  S t a t es  adopt 

t h e se  m e a s u r e s,  they 

shall 

c o n t a in 

a  r e f e r e n ce 

to  this  D i r e c t i ve  or 

shall 

be 

a c c o m p a n i ed  by  such  r e f e r e n ce  on  the  o c c a s i on  of  their 

o f f i c i al 

p u b l i c a t i o n.  The  m e t h o ds  of  m a k i ng 

s u ch  a 

r e f e r e n ce  shall  be  laid  down  by  the  M e m b er  S t a t e s. 

3.  M e m b er  S t a t es  shall  c o m m u n i c a te  to  the  C o m m i s s i on  the 

text  of  p r o v i s i o ns  of  n a t i o n al  law  w h i ch  they  adopt  in 

the  field  g o v e r n ed  by  this  D i r e c t i v e. 

A r t l sH  3 

T h is  D i r e c t i ve  is  a d d r e s s ed  to  the  M e m b er  S t a t es 

- # >-

FINANCIAL  STATEMENT 

This  proposal  will  not  entail  any  cost  to  the  budget  of  the 

E u r o p e an  C o m m u n i t i es 

- 9-

IMPACT  ON  C O M P E T I T I V E N E SS  AND  E M P L O Y M E NT 

i•  what  is  the main  Just ificatIon  for  the  measure? 

T h e re  are  two  r e a s o ns  to  implement  the  O wn  F u n ds  D i r e c t i ve 
at  this  s t a ge : 

(a)  according  to  this  Directive  within  six  months  of  its 
date  of  implementation,  the  Commission  shall  propose 
the  final  treatment  of  the  "Fund  for  General  Banking 
R isks" ; 

(b)  the  treatment  of  the  "Fund  for  General  Banking  Risks" 
at  international  level  permits  its  final  allocation 
according  to  the  criteria  adopted  in  international 
fora . 

• I•  Characteristics  of  the  enterprises  concerned 

The  enterprises  concerned  under  this  Directive  are  all 
credit  institutions  autorized  in  the  Community. 

M l.  What 

are 

the 

obi Igat tons 

Imposed 

directly 

pji 

e n t e r pr ise§? 

A c c o r d i ng  to  the  p r o p o s a l,  Member  S t a t es  may  include  the 
"Fund  for  General  B a n k i ng  R i s k s"  w i t h in  the  c a t e g o ry  of 
original  o wn  funds  of  credit  i n s t i t u t i o n s. 

-10-

IV.  What  o b l i g a t i o ns  are  likely  to be  imposed  indirectly  on 

e n t e r p r i s es  through  local  a u t h o r i t i e s? 

None 

V. 

Are  there  special  m e a s u r es  for  SMEs?  Li  SJSL,  Qf  what 

kind? 

None 

VI .  What  is the anticipated  effect  o n: 

(a)  the c o m p e t i t i v e n e ss  of  e n t e r p r i s e s? 

(b)  employment? 

(a)  By  granting  the same  definition  pertaining  the  original 

own  funds  it  is  ensured  that  credit  institutions  can 

engage  in  direct 

competition  in  a  common 

banking 

m a r k e t. 

(b)  An  adequate  treatment  of  the  own  funds  of  credit 

institutions 

serves  to  ensure  the  continuity  and 

therefore  to  protect  savings  and  e m p l o y m e n t. 

V I I.  Have  the  social  Partners  been  c o n s u l t e d?  What  are  their 

views? 

NO.  The  measure  proposed  has  no  impact  on  the  industrial 

r e l a t i o n s h i ps  and  the  level  of  employment. 

ISSN 0254-1475 

COM(91) 284 final 

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ISBN 92-77-74889-3 

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