Proposal for a European Parliament and Council Directive relating to the taking up and pursuit of the business of credit institutions (codified version)
Date: 1997-12-15
Institutions: European Commission
Subjects: banking, codification of EU law, credit institution, freedom to provide services, right of establishment

COMMiSSION  OF  THE  EUROPEAN  COMMUNITIES 

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Brussels,  15.12.1997 
COM(97)  706  final 

97 /0357  (COD) 

Proposal for a 

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, 
reasons  of  clarity  and 
rationality,  the  said  Directives  therefore,  should  be  codified  and 
combined  in  a single text; 

for 

(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; 

I. 

77/780/EEC 
(adapted) 

(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; 

2. 

77/780/EEC 

1. 

89/646/EEC 
(adapted) 

4. 

771780/EEC 

(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 
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; 

timetable  form 

in 

in 

(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 

77/780/EEC 
(adapted) 

5. 

+ 

6. 

4. 

89/646/EEC 

+ 

9. 

+ 

77/780/EEC 
(adapted) 

11. 

(adapted) 

12.  771780/EEC 
(adapted) 

(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 
supplementary 
authorizations  permitting  credit  institutions  to  carry  on  specific 
activities or undertake specific kinds of operations; 

laws  which 

provide 

special 

for 

(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 
the 
that  will  make 
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; 

it  possible  within 

5 

(9)  Whereas  the  principles  of mutual  recognition  and  home  Member 
State supervision  require that Member States' competent authorities 
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 
institution which is a legal  person must be authorized in the Member 
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 
the  authorization  of a credit  institution. where  they  are  liable  to  be 
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 
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 
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 
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; 

89/646/EEC 
(adapted) 

8. 

+ 

7. 

95/26/EC 
(adapted) 

3. 

+ 

4. 

+ 
s. 

95/26/EC 
(adapted) 

(adapted) 

6. 

95/26/EC 

(12)  Whereas  the  home  Member  State  may  also  establish  rules  stricter 
than those laid down in  Article 5 (1 ), first  subparagraph and (2), and 
Articles  7,  16,  30,  5 l  and  65  for  institutions  authorized  by  its 
competent authorities; 

9. 

89/646/EEC 
(adapted) 

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; 

17. 

89/646/EEC 
(adapted) 

( 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; 

12. 

+ 

13. 

89/646/EEC 
(adapted) 

(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; 

14. 

89/646/EEC 
(adapted) 

( 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; 

15. 

89/646/EEC 

16. 

89/646/EEC 

( 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; 

18. 

89/646/EEC 
(adapted) 

7 

13.  77/780/EEC 

+ 

19.  89/646/EEC 
(adapted) 

20.  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; 

12.  92/30/EEC 

(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; 

10.  89/646/EEC 
(adapted) 

8 

(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 
the  banking 
institutions  the  Contact  Group  set  up  between 
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 
than  credit 
institutions; 

institutions  other 

involving 

21.  89/646/EEC 

(adapted) 

22.  89/646/EEC 

(adapted) 

8. 

95/26/EC 
(adapted) 

9. 

95/26/EC 
(adapted) 

(27)  Whereas  it  is  necessary  to  specify the  conditions  under whicr.  such 

exchanges of information are authorized; 

10.  95/26/EC 

(28)  Whereas,  where  it  is  stipulated  that  information  may  be  disclosed 
only with  the  express  agreement of the  competent authorities,  these 
to 
may,  where  appropriate,  make 
compliance with strict conditions; 

their  agreement  subject 

11.  95/26/EC 

9 

(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; 

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 

10 

(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; 

4. 

89/299/EEC 
(adapted) 

(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; 

5. 

89/299/EEC 

(36)  Whereas  this  Directive  specifies  the  qualifying  criteria  for  certain 
own  funds  items,  and  the Member States remain  free  to  apply more 
stringent provisions; 

6. 

89/299/EEC 

(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; 

7. 

89/299/EEC 

(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; 

8. 

89/299/EEC 

(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; 

I 0.  89/299/EEC 

(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; 

· 11.  89/299/EEC 

(adapted) 

I I 

( 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; 

12.  89/299/EEC 
(adapted) 

( 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 
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); 

(1) ~  which 

institutions 

financial 

13.  89/299/EEC 
(adapted) 

+ 
12.  89/647/EEC 
(adapted) 

+ 
7. 

92/121/EEC 
(adapted) 

(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; 

14.  89/299/EEC 
(adapted) 

( 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; 

16.  89/299/EEC 
(adapted) 

( 45)  Whereas  the provisions  on  solvency ratios  are  the  outcome  of work 
carried  out  by 
is 
responsible  for  making  suggestions  to  the  Commission with  a  view 
to coordinating the coefficients applicable in the Member States; 

the  Banking  Advisory  Committee  which 

1. 

89/647/EEC 
(adapted) 

( 46)  Whereas  the  establishment of an  appropriate  solvency  ratio  plays  a 

2. 

89/647/EEC 

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; 

3. 

89/647/EEC 

( 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; 

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; 

5. 

89/647/EEC 
(adapted) 

(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  supervisory 
the  rules  contemplated  for 
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; 

7. 

89/647/EEC 
(adapted) 

8. 

89/647/EEC 
(adapted) 

96/10/EC 
(adapted) 

I. 
+ 

2. 

+ 

3. 

+ 

4. 

+ 

5. 

+ 

6. 

13 

(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; 

9. 

89/647/EEC 

(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; 

2. 

92/121/EEC 

4. 

92/121/EEC 

6. 

92/121/EEC 
(adapted) 

8. 

92/121/EEC 
(adapted) 

(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; 

the  Community  should 

(56)  Whereas,  in  an  internal  banking  market,  credit  institutions  are 
engaged  in  direct  competition  with  one  another  and  monitoring 
requirements  throughout 
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. 

92/121/EEC 
(adapted) 

2. 

92/30/EEC 

3. 

92/30/EEC 

(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; 

least  one  credit 

(60)  Whereas,  in  the  case  of groups with  diversified  activities  the  parent 
institution 
undertakings  of  which  control  at 
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 

(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; 

5. 

92/30/EEC 
(adapted) 

6. 

92/30/EEC 

7. 

92/30/EEC 
(adapted) 

9. 

92/30/EEC 
(adapted) 

(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; 

11.  92/30/EEC 

(adapted) 

(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, 

14.  77/780/EEC 

(adapted) 

+ 

15. 

(adapted) 

16 

(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 
'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 ); 

that  Committee  shall  act  as  a 

(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; 

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) 

(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; 

13.  89/647/EEC 

(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; 

10.  92/121/EEC 
(adapted) 

(71)  Whereas,  moreover,  the  hannonization of the  conditions relating  to 
the  reorganization  and  winding-up  of  credit  institutions  is  also 
proceeding; 

6. 

89/646/EEC 

(72)  Whereas  the  arrangements  necessary  for  the  supervision  of  the 

liquidity risks will also  have to  be harmonized; 

7. 

89/646/EEC 
(adapted) 

(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 

TABLE OF CONTENTS 

TITLE I 

DEFINITIONS AND SCOPE ................................................................................................... 21 

·· 

Article  1 
Ar.:icle2 
Article 3 

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 

TITLE II 

REQUIREMENTS FOR AC<;ES~ TO THE TAKING-UP AND PURSUIT OF 
THE BUSINESS OF CREDIT INSTITUTIONS .................................................................... 27 

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 

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 

TITLE III 

PROVISIONS CONCERNING THE FREEDOM OF ESTABLISHMENT 
AND THE FREEDOM TO PROVIDE SERVICES ................................................. 33 

Article  18 
Article  19 
Article 20 
Article 21 
Article 22 

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 

TITLE IV 

RELATIONS WITH THIRD COUNTRIES ........................................................................... 38 

Article 23 

Article 24 
Article 25 

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 

TITLE V 

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 

Supervision on a consolidated basis ................................................................................. 67 

Article 52 
Article 53 
Article 54 
Article 55 
Article 56 

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 
Article 58 
Article 59 

Composition and tasks of the Banking Advisory Committee ...................................................... 73 
Examination of the requirements for authorization ..................................................................... 74 
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 
in  the  first 
undertaking  which  corresponds  to  the  definition 
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; 

77/780/EEC 
Article 1,  1st indent 

-92/30/EEC 
Article 1,  1st indent 
(adapted) 
92/121/EEC 
Article 1 (a) 
(adapted) 

1. 

3. 

4. 

5. 

6. 

1. 

8. 

"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; 

77/780/EEC 
Article 1,  2nd indent 

"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; 

89/646/EEC 
Article 1 (3) 

89/646/EEC 
Article 1 (5) to (9) 
(as amended by 92/30/EEC, 
Article 10 (3)) 

"Competent  authorities"  shall  mean  the  national  authorities  which  are 
empowered by law or regulation to supervise credit institutions; 

"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; 

"Home  Member  State"  shall  mean  the  Member  State  in  which  a  credit 
institution has been authorized in accordance with Articles 4 to  11; 

"Host  Member  State"  shall  mean  the  Member  State  in  which  a  credit 
institution has a branch or in  which it provides services; 

"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 

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; 

92/30/EEC 
Article 1, 6th  indent 
(adapted) 

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.___ 

· 

89/646/EEC 
Article 1 (10) to (12) 

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; 

92/30/EEC 
Article 1, 7th indent 
(adapted) 
92/121/EEC 
Article 1 (c) 
(adapted) 

13.  "Subsidiary" shall  mean  a subsidiary undertaking as defined  in  Articles 

I and 2 of Directive 83/349/EEC; 

89/646/EEC 
Article 1 (13) 
1

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) 

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 
in  point  1,  first  subparagraph  and 
covered  by  the  definition 
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 

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; 

89/647/EEC 
Article 2 (1 ), 6th  to 8th  indents 

the 

and  Development, 

Inter-American  Development  Bank, 

19.  "Multilateral development banks" shal]  mean the International Bank for 
Finance 
Reconstruction 
Corporation, 
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; 

International 

the 

(as amended by 91/31/EEC, 94/7/EC and 
9S/67/EC) 

20.  "'Full-risk', 

'medium-risk', 

'low-risk'  off 
balance-sheet  items"  shall  mean  the  items  described  in  Article  43  (2) 
and  listed in Annex II; 

'medium/low-risk'  and 

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; 

92/30/EEC 
Article 1, 3rd to 5th indents 

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; 

92/121/EEC 
Article l  (h) 
(adapted) 

23 

25.  •~Group of connected clients" shall mean: 

92/121/EEC 
Article 1 (m) 

- ~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. 

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) 

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. 

92/30/EEC 
Article 2 
(adapted) 

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 

3. 

This Directive shall not apply to: 

- the central banks of Member States, 

- post office giro institutions, 

77n80/EEC 
Article 2 (2) 
(as amended by 96/13/EC, 
Article  1) 
(adapted) 

- 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" 
"(JaiaB'i 
(Elliniki  Trapeza  Viomichanikis  Anaptyxeos), 
E>atiaMoaec;epi  Me  AaiaBui" 
(Tamio  Parakatathikon  kai 
Danion),  and  the  "(Ja+oatii'ieeu  Caieao61:>M'i"  (Tachidromiko 
Tamieftirio ), 

the 

- 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 

'Nederlandse 

lnvesteringsbank  voor 
the  Netherlands, 
Noordelijke 
Ontwikkelingslanden 
Ontwikkelingsmaatschappij', 
Industriebank  Limburgs 
Instituut  voor  Ontwikkeling  en  Financiering'  and  the  'Overijsselse 
Ontwikkelingsmaatschappij NV', 

the 
'NV 

NV', 

'NV 

the 

- 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 

- in  .  the  United  Kingdom, 

the 
the  National  Savings  Bank, 
Commonwealth  Development  Finance  Company  Ltd, 
the 
Agricultural  Mortgage  Corporation  Ltd,  the  Scottish  Agricultural 
Securities  Corporation  Ltd, 
for  overseas 
governments and  administrations, credit unions and  municipal banks. 

the  Crown  Agents 

77/780/EEC 
Article 2 (2) 
(as amended by 96/13/EC, 
Article  I) 

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. 

77/780/EEC 
Article 2 (3) 
(adapted) 

5. 

in 

institutions  situated 

Credit 
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: 

77/780/EEC 
Article 2 (4) (a), (b) and (c) 
(adapted) 

- 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. 

the  Council,  acting  on  a  proposal 

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 
Commission,  which  shall  for  this  purpose,  consult  the  Banking 
the 
Advisory  Committee,  may 
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. 

lay  down  additional  rule;;  for 

from 

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. 

89/646/EEC 
Article 2 (3) 
89/647/EEC 
Article 1 (3) 
92/121/EEC 
Article 2 (2) (b) 
(adapted) 

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 

89/646/EEC 
Article 3 

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. 

77/780/EEC 
Article 3 (1) 
(adapted) 

Article 5 

Initial capital 

l.  Without  prejudice  to  other  conditions  of general  application  laid 
down  by  national 
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. 

law, 

77/780/EEC 
Article 3 (2) 
(adapted) 
89/646/EEC 
Article 4 (1) 
(adapted) 

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 ). 

77/780/EEC 
Article 10 (1) 3rd subparagraph 
(adapted) 

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: 

89/646/EEC 
Article 4 (2) 
(adapted) 

(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 

(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. 

89/646/EEC 
Article 4 (2) 
(adapted) 

89/646/EEC 
Article 10 (1) to (5) 
(adapted) 

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 
the 
undertaking  only  when  there  are  at  least  two  persons  who  effectively 
direct the business of the credit institution. 

to 

77/780/EEC 
Article 3 (2) 
(adapted) 

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. 

77/780/EEC 
Article 3 (2) (a) 
(as amended by 95/26/EC, 
Article 3 (2)) 

28 

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. 

89/646/EEC 
Article 5,  I st paragraph 

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. 

89/646/EEC 
Article I  (10), 2nd subparagraph 
(adapted) 

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. 

89/646/EEC 
Article 5,  2nd paragraph 

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. 

77/780/EEC 
Article 3 (2) 
(as amended by 95/26/EC, 
Article 2 (2)) 
(adapted) 

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. 

77/780/EEC 
Article 3 (4) 
(adapted) 

(I)  OJ  No L348, 17.12.1988, p.  62. 

29 

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. 

77/780/EEC 
Article 3 (3) (a) 
(adapted) 

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. 

77/780/EEC 
Article 3 (6) 

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. 

77/780/EEC 
Article 3 (7) 

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: 

89/646/EEC 
Article 7 

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. 

89/646/EEC 
Article 6 (1) 
(adapted) 

30 

Article 14 

Withdrawal of authorization 

I.  The  competent  authorities  may  withdraw  the  authorization  issued  to  a 
credit institution ____  only where such an  institution: __ _  _ 

77/780/EEC 
Article 8 (l) 
(adapted) 

(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. 

77/780/EEC 
Article 8 (5) 

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. 

77/780/EEC 
Article 5 
(adapted) 

31 

89/646/EEC 
Article 11 
(Corrigendum, OJ No L 311, 
14.11.1997, p.  34) 

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. 

If  the  acquirer  of the  holdings  referred  to  in  paragraph  I  is  a  credit 
2. 
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. 

89/646/EEC 
Article  1 (10), 2nd subparagraph 
(acJapted) 

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. 

89/646/EEC 
Article 13  (2) 

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. 

89/646/EEC 
Article 18 (1) 
(adapted) 

33 

89/646/EEC 
Article 18 (2) 
(as amended by 92/30/EEC, 
Article 10 (2), 2nd indent) 

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 

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. 

89/646/EEC 
Article 19 
(adapted) 

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) 

(b) 

(c) 

the  Member  State  within  the  territory  of which  it  plans  to  establish  a 
branch; 

a programme  of operations  setting  out  inter alia  the  types  of business 
envisaged and the  structural organization of the branch; 

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 
institution  in  accordance  with  Article  22  and  if 
supervision  of the  credit 
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 

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. 

89/646/EEC 
Article 19 

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. __  

89/646/EEC 
Article 23  (1) 
(adapted) 

~ 

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. 

89/646/EEC 
Article 20 

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. 

89/646/EEC 
Article 23  (2) 
(adapted) 

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. 

89/646/EEC 
Article 21 
(adapted) 

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 
institution 
those  authorities  shall 
competent  authorities, 
concerned  to  put an  end  to  that irregular situation. 

require 

the 

36 

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. 

89/646/EEC 
Article 21 
(adapted) 

If, despite the measures taken by the home Member State or because such 
4. 
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, 
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. 

·  insofar  as  is  necessary,  to  prevent  that  institution  from 

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 

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 
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. 

institution  concerned  from 

89/646/EEC 
Article 21 
(adapted) 

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 
the  Banking  Advisory 
Committee accordingly; 

inform 

(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.  - - - - - -

89/646/EEC 
Article 8 
(adapted) 

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. 

89/646/EEC 
Article 9 
(adapted) 

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 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 
Commission,  decide  by  a qualified  majority  whether  the  measures  shall  be 
continued. 

the  Council  may,  acting  on  a  proposal  from 

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 

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. 

89/646/EEC 
Article 9 
(adapted) 

taken  pursuant 

7.  Measures 
the 
Community's  obligations  under  any  international  agreements,  bilateral  or 
multilateral,  governing  the  taking-up  and  pursuit  of the  business  of credit 
institutions. 

this  Article  shall  comply  with 

to 

· 

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. 

77/780/EEC 
Article 9-

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 . 

to  paragraph  I,•  the  Community  may, 

3.  Without  prejudice 
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: 

92/30/EEC 
Article 8 
(adapted) 

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 

2.  The  agreements  referred  to  in  paragraph  1  sha11  in  particular  seek  to 
ensure both: 

92/30/EEC 
Article 8 
(adapted) 

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 
those  provisions  of  this  Directive  which  give 
responsibility to the authorities of the host Member State. 

to 

89/646/EEC 
Article 13 
(as amended by by Directive 
92/30/EEC, Article 10 (2)) 

2.  Paragraph  l __  shall not prevent supervision on a consolidated basis 
pursuant to this Directive. 

89/646/EEC 
Article 13  (3) 
(as amended by 92/30/EEC, 
Article 10 (2), 2nd indent) 
(adapted) 

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. 

89/646/EEC 
Article 14 (2) 

41 

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 

77/780/EEC 
Article 7 (1) 
(as amended by 89/646/EEC, 
Article 14 (1) 

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. 

89/646/EEC 
Article 15 

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). 

89/646/EEC 
Article 15 
(as amended by 92/30/EEC, 
Article 10 (4) 
(Corrigendum, OJ  No  L 280, 24.9.1992, p.  54) 

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. 

89/646/EEC 
Article 15 

42 

77/780/EEC 
Article 12 (1) to (5) 
(as amended by 89/646/EEC, 
Article 16) 
(adapted) 

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 
paragraphs  l  or 2 may  use it only in  the course of their duties: 

confidential 

rece1vmg 

information  under 

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 

authorities entrusted with  the  public duty of supervising other financial 
organizations and  insurance  companies  and  the  authorities  responsible 
for the supervision of financial  markets, 

77/780/EEC 
Article 12  (1) to (5) 
(as amended by 89/646/EEC, 
Article 16) 
(adapted) 

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. 

77/780/EEC 
Article 12  (5) (a) 
(as amended by 95/26/EC, 
Article 4 (2)) 
(adapted) 

Member  States  which  have  recourse 
subparagraph shall require at least that the following  conditions are met: 

the  provisions  of  the  first 

to 

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 

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. 

77/780/EEC 
Article  12  (S) (b) 
(as amended by 95/26/EC, 
Article 4 (3)) 

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, 
overseeing payment systems, 

to  other  public  authorities 

responsible 

for 

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. 

77/780/EEC 
Article 12  ( 6) 
(as amended by 95/26/EC, 
Article 4 (4)) 

45 

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 
legislation  on  the 
central  government  administrations  responsible  for 
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. 

the  competent  authorities 

10.  This  Article  shall  not  prevent 
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. 

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)) 

46 

77/780/EEC 
Article 12a 
(as amended by 95/26/EC, 
Article 5) 

Article 31 

Duty of persons responsible for the legal control of 
annual and consolidated accounts 

1. 

Member States shall  provide at least that: 

(a) 

any  person  authorized  within  the  meaning  of  Council  Directive 
84/253/EEcC 1),  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 
regulations  or 
administrative provisions which lay down the conditions governing 
authorization  or  which  specifically  govern  pursuit  of the  activities 
of credit institutions, or 

laws, 

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. 

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. 

77/780/EEC 
Article 13 

Chapter 2 

Technical instruments of prudential supervision 

Section  1 

Own funds 

Article 34 

General principles 

89/299/EEC 
Article 1 (1) 
(adapted) 

89/299/EEC 
Article 2 (1) 
(adapted) 

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) 

(2) 

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; 

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 

(3) 

(4) 

(5) 

funds  for  general  banking  risks  within  the  meaning  of Article  38  of 
Directive 86/635/EEC; :, 

revaluation  reserves  within  the  meaning  of  Article  33  of  Directive 
78/660/EEC; _ _  _ 

value  adjustments  within  the  meaning  of Article  37  (2)  of Directive 
86/635/EEC; 

89/299/EEC 
Article 2 (l) 
(adapted) 

(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. 

institution  are  held 
Where  shares  in  another  credit  or  financial 
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 (1) 
(adapted) 

89/299/EEC 
Article 2 (2) 
(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. 

89/299/EEC 
Article 2 (3) 

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: 

89/299/EEC 
Article 3 
(adapted) 

(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, 
the  competent 

verified  by  independent  auditors,  made  known 
authorities and placed under the supervision of the latter. __  _ 

to 

50 

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. 

~ 

.89/299/EEC 
Article 4 
(adapted) 

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 

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, 

89/299/EEC 
Article 4 
(adapted) 

89/299/EEC 
Article 5 
(adapted) 

translation  differences 

the 
accordance with  Article 39 (6) of Directive 86/635/EEC, 

in  consolidated 

included 

reserves 

in 

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 

89/29WEEC 
Article 6 (1) and (4) 
(as amended by 91/633/EEC, 
Article 1 (1)) 

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. 

8. 9/299/EEC 
Article 7 
' 

~ .

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. 

89/647/EEC 
Article 3 (1) to (4) 
(as amended by 92/30/EEC, 
Article 10 (2), 3rd indent) 
(adapted) 

53 

to  credit 

institutions'  compliance  with 

S.  Without  prejudice 
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. 

89/647/EEC 
Article 3 (7) and (8) 
(adapted) 

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. 

89/647/EEC 
Article 4 
1

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. 

89/647/EEC 
Article S 

In  the case of the off-balance-sheet items listed  in  Annex  II,  a two-stage 

2. 
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 

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: 

89/647/EEC 
Article 6 

(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) 

asset  items  constituting  claims  carrying  the  explicit  guarantees  of 
Zone  A  central  governments  and  central  banks  or  of the  European 
Communities; 

89/647/EEC 
Articl~ 6 
(as amended by 95/15/EC, 
Article 2) 

(5) 

(6) 

(7) 

asset  items  constituting  claims  on  Zone  B  central  governments  and 
central  banks  denominated  and  funded  in  the  national  currencies  of the 
borrowers; 

89/647/EEC 
Article 6 
(adapted) 

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; 

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) 

(4) 

(5) 

(6) 

(7) 

asset  items  constituting  claims  carrying  the  explicit  guarantee  of the 
European  Investment Bank (EIB); 

asset  items  constituting  claims  carrying  the  explicit  guarantees  of 
multilateral development banks; 

asset items constituting claims on  Zone A regional  governments or local 
authorities, subject to  Article 44; 

asset  items  constituting  claims  carrying  the  explicit  guarantees  of Zone 
A regional  governments or local  authorities, subject to  Article 44; 

asset items constituting claims on Zone A credit institutions but not 
constituting such  institutions' own  funds;  __ _  _ 

55 

(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; 

89/647/EEC 
Article 6 
(adapted) 

(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) 

(2) 

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; 

(as amended by 95/1/EC, Euratom, 
ECSC, 
Annex  I, point XI, 8, III, 2 (a)) 

. 

prepayments and  accrued  income:  these  assets  shall  be  subject to  the 
weighting  corresponding 
the  counterparty  where  a  credit 
institution  is  able  to  determine  it  in  accordance  with  Directive 
to  determine  the 
86/635/EEC.  Otherwise,  where 
counterparty, it  shall  apply a flat-rate weighting of 50 %; 

is  unable 

to 

it 

56 

89/647/EEC 
Article 6 
{adapted) 

(d) 

JOO% weighting 

( J) 

(2) 

(3) 

( 4) 

(5) 

(6) 

asset  items  constituting  claims  on  Zone  B  central  governments  and 
central  banks  except  where  denominated  and  funded  in  the  national 
currency of the borrower; 

asset  items  constituting  claims  on  Zone  B  regional  governments  or 
local authorities; 

asset items constituting claims with a maturity of more than one year 
on Zone B credit institutions; 

asset  items  constituting  claims  on  the  Zone  A  or  Zone  B  non-bank 
sectors; 

tangible  "Assets" within  the  meaning  of Article  4  (10)  of Directive 
86/635/EEC; 

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 

3.  The methods set out in  Annex  III shall  be applied to the  interest-rate and 
foreign-exchange risks  listed  in  Annex  IV. 

89/647/EEC 
Article 6 

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. 

89/647/EEC 
Article 7 

58 

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. 

89/647/EEC 
Article 8 
(adapted) 

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. 

89/647/EEC 
Article 2 (2) 
(adapted) 

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. 

89/647/EEC 
Article 10 
{adapted) 

59 

If the ratio falls  below 8 % the competent authorities shall ensure that  the 
3. 
credit institution  in question takes appropriate measures to restore the ratio  to 
the agreed  minimum as quickly as possible. 

89/647/EEC 
Article 10 
(adapted) 

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. 

92/121/EEC 
Article 3 
(adapted) 

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 

92/121/EEC 
Article 4 
(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 

(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; 

92/121/EEC 
Article 4 
(adapted) 

(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 
the 
institutions  which  are  not  credit  institutions  but  which  fulfil 
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) 

(as amended by 95/1/EC, Euratom, 
ECSC, 
Annex I, point XI, B, III, (3) (a)) 
(adapted) 

(o) 

(p) 

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; __ _  _ 

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 
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; 

laid  down  by 

(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 

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 %. 

92/121/EEC 
Article 4 
(adapted) 

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 

Article SO 

Supervision on a consolidated or unconsolidated basis 
of large exposures 

If the  credit  institution  is  neither  a parent  undertaking  nor  a subsidiary, 
1. 
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. 

92/121/EEC 
Article 5 (1) to (3) 

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 

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. 

89/646/EEC 
Article 12  (1) to (S) 

in 
2.  The  total  amount  of  a  credit  institution's  qualifying  holdings 
undertakings  other 
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. 

than  credit 

institutions, 

financial 

3.  The  Member  States  need  not  apply  the  limits  laid  down  in  paragraphs  I 
in  Directive 
in 
and  2  to  holdings 
73/239/EEC(l), and  Directive 79/267/EEC(2). 

insurance  companies  as  defined 

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 

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. 

89/646/EEC 
Article 12 (8) 

92/30/EEC 
Article 3 (1) to (7) 
(adapted) 

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 

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. 

92/30/EEC 
Article 3 (1) to (7) 
(adapted) 

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 
in 
include  financial  holding  companies 
accordance with paragraph 2. 

in  consolidated  supervision, 

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 

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 
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. 

in  accordance  with 

the  subsidiary 

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) 

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. 

92/30/EEC 
Article 3 (10) 

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. 

92/30/EEC 
Article 4 
(adapted) 

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 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. 

92/30/EEC 
Article 5 

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 

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: 

92/30/EEC 
Article 5 

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 
in 
consolidations in  the cases, and in  accordance with the methods laid down  in 
paragraphs  I to 4 of this Article. 

included 

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 
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. 

the  mixed-activity  holding  company  and 

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). 

92/30/EEC 
Article 6 

71 

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. 

92/30/EEC 
Article 7 
(adapted) 

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. 

information  referred 

3.  Member  States  shall  authorize  the  exchange  between  their  competent 
authorities  of  the 
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. 

in  paragraph  2,  on 

to 

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 

Infonnation  received, 

5. 
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.  __  

92/30/EEC 
Article 7 
(adapted) 

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. 

77n80/EEC 
Article 11 
(adapted) 

73 

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. 

77/780/EEC 
Article 3 (5) 
(adapted) 

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. 

' . 

77/780/EEC 
Article 6 
(adapted) 

74 

Where  appropriate,  the  Banking  Advisory  Committee  shall  be  guided  by 
technical  consultations  between  the supervisory  authorities of the  categories 
of institutions concerned. 

77/780/EEC 
Article 6 
(adapted) 

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 
third 
the  supervisory  authorities  referred 
carried  out  by 
subparagraph  of paragraph  1 on  the  basis  of the  calculations  referred  to  in 
paragraph 2. 

the 

to 

in 

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 
information as  listed in  Article 28, 

the  competent  authorities  must  exchange 

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) 

75 

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) 

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: 

89/299/EEC 
Article 4a 
(as amended by 92/16/EEC, 
Article 1) 

76 

(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; 

89/299/EEC 
Article 4a 
(as amended by 92/16/EEC, 
Article 1) 

(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. 

89/647/EEC 
Article 11  (5) 

77 

2.  Article  43  (3)  shall  not  affect  the  competent  authorities'  recognition  of 
bilateral contracts for novation concluded concerning: 

96/10/EC 
Article 2 
(adapted) 

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. 

89/647/EEC 
Article 11  (1) to (3) 
(adapted) 

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 

If,  on  5  February  1993,  ____ a  credit  institution  had  already 
1. 
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. 

92/121/EEC 
Article 6 
(adapted) 

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 
the  Banking  Advisory 
the  Commission  and 
Committee of the schedule for the general process adopted. 

inform 

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 

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. 

92/121/EEC 
Article 6 
(adapted) 

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. 

In  the  case  of credit  institutions  the  own  funds  of which 

6. 
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. 

as amended by 9S/1/EC, Euratom, 
ECSC, 
Annex I, point XI, B, III, (3) (b) 

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. 

92/121/EEC 
Article 6 
(adapted) 

79 

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. 

89/646/EEC 
Article 12 (7) 
(adapted) 

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 

For the Counci~ 

The President 

80 

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. 

89/646/EEC 
Annex 

Corrigendum 
(OJNoL311, 
14.11.1997, 
p.  34) 

Corrigendum 
(OJNoL83, 
30.3.1990, 
p.  128) 

(1) 

Including inter alia: 

- consumer credit, 
- mortgage credit, 
- factoring, with or without recourse, 
- financing of commercial transactions (including forfeiting). 

81 

ANNEX  II 

CLASSIFICATION OF OFF-BALANCE-SHEET ITEMS 

89/647/EEC 
Annex  I 
(adapted) 

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 

ANNEX  III 

THE TREATMENT OF OFF-BALANCE-SHEET ITEMS CONCERNING  INTEREST 
AND  FOREIGN- EXCHANGE RA TES 

89/647/EEC 
Annex  II 
(as amended b 
96/10/EC, 
Article 1) 

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: 

Residual maturity 

One year or less 
More than one year 

TABLE  1 

Interest-rate contracts 
0% 
0,5  % 

Foreign-exchange contracts 
1% 
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 maturityl 1J 

Interest-rate contracts 
0,5% 
1% 

Foreign-exchange contracts 
2% 
5% 

One year or less 
More than one year but not 
exceeding two years 
Additional allowance for  each 
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 

1% 

3% 

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. 

(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. 

89/647/EEC 
Annex  II 
(as ame.nded b 
96/10/EC, 
Article 1) 

(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 amended 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): 
Step (b): 

the current replacement cost, and  in 
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 

One year or less 
More than one year but not more 
than two years 
Additional allowance for each 
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 

2,25 % 

0,75 % 

p 

Foreign-exchange contracts 
1,50 % 
3,75 % 

Interest-rate contracts 
0,35 % 
0,75 % 

authorities, choose either original or residual maturity. 

85 

TYPES OF OFF-BALANCE-SHEET ITEMS CONCERNING INTEREST RA TES 
AND  FOREIGN EXCHANGE 

ANNEX  IV 

89/647/EEC 
Annex  Ill 

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 

ANNEXV 

PARTA 

Repealed Directives 
together with their successive amendments 

(referred to  in Article 66) 

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 
- 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 

(referred to in  Article 66) 

Directive 

Deadline for implementation 

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) 

Article 6 (2), 
other provisions 

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 

Dir.  77/780/EEC 
Article  1,  1st indent 
Article  l, 2nd indent 

This  Directive 
Article  l  ( l) 
Article  I (2) 
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 2 (l) 
Article 2 (2) 
Article 2 (3) 
Article 2 ( 4) 
Article 2 (5),  l st, 2nd and  Article 2 (4) (a), (b) and (c) 
3rd subparagraphs 
Article 2 (6) 
Article 3 
Article 4 
Article 5 ( l ),  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 (I) 
Article 3 (2),  l st subpara. 

Article  l, 5th indent 
Article 2 (l) 

Article 2 (2) 
Article 2 (3) 

Article 3 (2),  1st subpara., 
3rd indent and 2nd subpara. 
Article 3 (2)a 

Article 6 (2) 
Article 7 (I) and (2) 

Article 7 (3) 

Article 8 
Article 9 
Article  10 
Article  11 

Article 3 (2) 3rd, 4th and 
5th subparas. 
Article 3 (4) 
Article 3 (3) (a) 
Article 3 (6) 
Article 3 (7) 

ANNEX  VI 
CORRELATION TABLE 

Dir.  89/299/EEC 

Dir. 89/646/EEC 

Dir.  89/647/EEC 

Dir. 92/30/EEC 
Article  I,  I st indent 

Dir. 92/121/EEC 
Article  1 (a) 

Dir. 96/10/EC 

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  1, 6th  indent 

Article  I, 7th indent 
Article  I , 8th indent 

Article  1, 3rd to 5th indents 

Article  I (c) 
Article  I (d) 

Article  l  (h) 
Article  I (m) 

Article 2 (I) 

Article  I  (1) 

Article 2 

Article 2 (3) 
Article 3 

Article  l  (3) 

Article 2 (2) (b) 

Article 4 (2) 
Article  10 (I) to (5) 

Article  l  (10), 2nd subpara. 
and Article 5 ( l) and (2) 

89 

Dir.  77/780/EEC 

Dir.  89/299/EEC 

Article 8 (I) 
Article 8 (5) 
Article 5 

This  Directive 
Article  12 
Article  13 
Articlel4(1) 
Article  14  (2) 
Article  15 
Article  16  ( 1) to (5) 
Article  16 (6) 
Article  17 
Article  18 
Article  19 
Article  20  (I) to  (6) 
Article  20  (7) 
Article 21  ( 1} and (2) 
Article  21  (3) 
Article 22 
Article 23  (I) 
Article 23  (2) to  (7) 
Article 24 
Article 25 
Article 26 
Article 27 
Article 28 
Article 29 
Article JO  (1) to (5) 
Article 30  (6) 
Article  30 (7) 
Article JO  (8) 
Article 30 (9) 
Article JO  (10) 
Article 31 
Article 32 
Article 33 
Article 34  (I) 
Article 34 (2) to (4) 
Article 35 
Article 36 
Article 37 
Article 38 
Article 39 
Article 40 
Article 41 
Article 42 
Article 43 
Article 44 
Article 45 
Article 46 

Article 9 

Article 7 (I) 

Article  12  (1) to (5) 
Article 12 (5a) 
Article  12 (5b) 
Article  12  (6) 
Article  12 (7) 
Article  12  (8) 
Article  12a 

Article  13 

Dir.  89/647/EEC 

Dir.  92/30/EEC 

Dir.  92/121/EEC 

Dir.  96/10/EC 

Article 8 

Dir.  89/646/EEC 
Article 7 
Article 6 ( I ) 

Article  11  (I) to (5) 
Article  I ( 10), 2nd subpara. 
Article  13  (2) 
Article  18(1) 
Article  18  (2) 
Article  19 
Article 23  (I) 
Article 20 
Article 23  (2) 
Article 21 
Article 8 
Article 9 

Article 13  (1) and (3) 
Article  14 (2) 

Article  15 

Article  17 

Article  I {I) 
Article 2 (I) to  (3) 
Article 3 
Article 4 
Article 5 
Article 6 (I) and (4) 
Article 7 

Article 3 (l)to (4), (7) and (8) 
Article 4 
Article 5 
Article 6 
Article 7 
Article 8 
Article 2 (2) 

90 

; 

This  Directive 
Article 47 
Article 48 
Article 49 
Article 50 
Article5I  (l}to(5) 
Article5I  (6) 
Article 52 ( 1) to  (7) 
Article 52 (8) and  (9) 
Article 52 (10) 
Article 53 
Article 54 
Article 55 
Article 56 
Article 57 
Article 58 
Article 59 
Article 60 
Article 61 
Article 62  (1) 
Article 62  (2) 
Article 63 
Article 64 
Article 65 
Article  66 
Article 67 
Article 68 

Annex  I 
Annex  II 
Annex  Ill 
Annex  IV 
Annex V 
Annex  VI 

Dir.  77/780/EEC 

Dir.  89/299/EEC 

Dir.  89/<>46/EE(' 

Dir.  89/647/EEC 
Article  10 

Dir.  92/30/EEC 

Dir.  92/121/EEC 

Dir.  96/10/EC 

Article  12 (I) lo (5) 
Article  12 (8) 

Article 3 (5) and (6) 

Article 3 
Article 4 
Article 5 (1) to  (3) 

Article 5 (4) and (5) 

Article 3 ( 1) to  (7) 
Article 3 (8) and (9) 
Article 3 ( I 0) 
Article 4 
Article 5 
Article 6 
Article 7 

Article  11 
Article 3 (5) 
Article 6 

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Article 8 
Article 4a 

Article 22 

Article 9 

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Article  I 2 (7) 
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Annex 

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Article  11  (5) 

Article  11  (I) to (3) 

· 

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Annex  I 
Annex  lI 
Annex Ill 
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Article 7 

Article 6 

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Article 2 

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91 

ISSN 0254--14 75 

COM(97) 706 final 

DOCUMENTS 

EN 

01  09  10 

Catalogue  number  CB-C0-97-726-EN-C 

ISBN  92-78-29624-4 

Office for· Official Publications of the European Communities 

L-2985  Luxembourg 

92-