Proposal for a Directive of the European Parliament and of the Council on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and the Council
Date: 2001-04-24
Institutions: European Commission
Subjects: company law, conglomerate, credit institution, financial control, financial solvency, group of companies, insurance company, investment company

31.7.2001

EN

Official Journal of the European Communities

C 213 E/227

Proposal for a Directive of the European Parliament and of the Council on the supplementary
supervision of credit institutions, insurance undertakings and investment firms in a financial
conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC,
93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament
and the Council

(2001/C 213 E/07)

(Text with EEA relevance)

COM(2001) 213 final (cid:151) 2001/0095(COD)

(Submitted by the Commission on 24 April 2001)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 47(2) thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of
Committee,

the Economic and Social

Having regard to the opinion of the Committee of the Regions,

Having regard to the opinion of the European Central Bank,

Acting in accordance with the procedure laid down in Article
251 of the Treaty,

Whereas:

(1) The current Community legislation provides for a compre-
hensive set of rules on the prudential supervision of credit
institutions, investment firms and insurance undertakings
on a stand alone basis and credit institutions, investment
that are part of
firms and insurance undertakings
respectively a banking/investment
firm group or an
insurance group, i.e. groups with homogeneous financial
activities.

(3) The Commission Action Plan for Financial Services (1)
identifies a series of actions that are needed in order to
complete the Single Market for Financial Services, and
announces the development of supplementary prudential
legislation for financial conglomerates that will address
loopholes in the present sectoral legislation and additional
prudential risks to ensure sound supervisory arrangements
with regard to financial groups with cross-sectoral
financial activities. Such an ambitious objective can only
the
be
institutions,
supplementary
insurance undertakings
in a
firms
financial conglomerate is one such stage.

credit
and investment

establishment of

attained by

stages. The

supervision

of

(4) Other international fora also have identified the need for
the development of appropriate supervisory concepts with
regard to financial conglomerates.

(5) In order to be effective, the supplementary supervision of
credit institutions, insurance undertakings and investment
firms in a financial conglomerate should be applied to all
such conglomerates, no matter how they are structured.
financial
Supplementary supervision should cover all
activities identified by the sectoral
legislation
financial
and all entities principally engaged in such activities
should be included in the scope of the supplementary
supervision.

(2) New developments

regards

institutions,

in financial markets

lead to the
creation of
financial groups that provide services and
the financial markets,
products in different sectors of
called financial conglomerates. Until now, there has been
no form of prudential supervision on a group-wide basis
firms and insurance
of credit
investment
in
undertakings that are part of such a conglomerate,
particular as
the solvency position and risk
concentration at the level of the conglomerate, the trans-
actions between entities of the conglomerate and the fit
and proper character of the management. Some of these
conglomerates belong to the biggest financial groups that
are active in the financial markets and provide services on
a global basis. If such conglomerates, and in particular
credit institutions, investment firms and insurance under-
takings that are part of such a conglomerate, were to face
financial difficulties, these could seriously destabilise the
financial system and affect individual depositors, insurance
police holders and investors.

(1) COM(1999) 232 final.

the financial situation of credit
insurance undertakings and investment

(6) The competent authorities should be able to assess at a
insti-
group-wide level
firms
tutions,
in particular
that are part of a financial conglomerate,
as
elimination of
including
multiple gearing of own funds instruments, risk concen-
tration and intra-group transaction.

solvency,

regards

the

(7) Financial

conglomerates

are often managed on a
business-line basis that does not fully coincide with the
conglomerate’s legal structures. In order to take account of
this evolution the requirements for management should
be further extended.

(8) The competent authorities involved must have the means
financial
the
for

of obtaining
conglomerate
performance of their supplementary supervision.

entities within a
necessary

from the
the

information

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Official Journal of the European Communities

31.7.2001

(9) There is a pressing need for

increased collaboration
between authorities responsible for the supervision of
credit institutions, insurance undertakings and investment
firms, including the development of ad hoc co-operation
arrangements between the authorities involved in the
supervision of entities belonging to the same financial
conglomerate.

(10) In the case of financial conglomerates, providing a range
of cross-sector and in most cases also cross-border
services, a co-ordinator should in principle be appointed
among the supervisory authorities involved.

(11) Credit institutions, insurance undertakings and investment
firms, that have their head office in the Community, can
be part of a financial conglomerate, the head of which is
outside
these
It
regulated entities also are subject to an equivalent appro-
priate supplementary supervisory regime.

is necessary that

the Community.

(12) In accordance with the principles of subsidiarity and
proportionality as set out in Article 5 of the Treaty, the
objectives of
the proposed action, namely the estab-
lishment of rules on the supplementary supervision of
credit institutions, insurance undertakings and investment
firms in a financial conglomerate, cannot be sufficiently
achieved by the Member States and can therefore, by
reason of
the action, be
achieved by the Community. This Directive
better
confines itself
to
achieve those objectives and does not go beyond what
is necessary for that purpose. Although this Directive
defines minimum standards, Member
States may,
however, lay down stricter rules.

to the minimum required in order

the scale and the effects of

(13) This directive

respects

and
the
observes the principles recognised in particular by the
Charter of Fundamental Rights of the European Union
as general principles of Community law.

fundamental

rights

(14) Since the measures necessary for the implementation of
this Directive are measures of general scope within the
meaning of Article 2 of Council Decision 1999/468/EC of
28 June 1999 laying down the procedures for the exercise
of implementing powers conferred on the Commission (1),
they should be adopted by use of
regulatory
procedure provided for in Article 5 of that Decision.

the

(15) The existing sectoral rules for credit institutions, insurance
firms should be supple-
undertakings and investment
mented to a minimum level,
in particular to avoid an
unlevel playing field amongst regulated entities as well
as regulatory arbitrage between the sectoral rules and
those
and between the
conglomerates
sectoral rules themselves. Therefore, Council Directives

financial

for

(1) OJ L 184, 17.7.1999, p. 23.

insurance

than life

73/239/EEC of 24 July 1973 on the coordination of laws,
regulations and administrative provisions relating to the
taking up and pursuit of the business of direct insurance
other than life assurance (2), 79/267/EEC of 5 March 1979
laws, regulations and adminis-
on the coordination of
trative provisions relating to the taking up and pursuit
of the business of direct life assurance (3), 92/49/EEC of
18 June 1992 on the coordination of
laws, regulations
and administrative provisions relating to direct insurance
and amending Directives
other
73/239/EEC and 88/357/EEC (third non-life insurance
Directive) (4), 92/96/EEC of 10 November 1992 on the
coordination of
regulations and administrative
provisions relating to direct life assurance and amending
life
Directives 79/267/EEC and 90/619/EEC (third
insurance Directive) (5), 93/6/EEC of 15 March 1993 on
the capital adequacy of investments firms and credit insti-
tutions (6) and 93/22/EEC of 10 May 1993 on investment
services in the securities field (7), as well as European
Parliament
of
27 October 1998 on the supplementary supervision of
insurance undertakings in an insurance group (8) and
2000/12/EC of 20 March 2000 relating to the taking up
and pursuit of the business of credit institutions (9) should
be amended accordingly. The objective of further harmon-
isation can however only be achieved by stages and needs
to be based on careful analysis,

Council Directives

98/78/EC

laws,

and

HAVE ADOPTED THIS DIRECTIVE:

CHAPTER I

OBJECTIVE, DEFINITIONS AND SCOPE

Article 1

Objective

This Directive lays down rules for supplementary supervision
of regulated entities which have obtained an authorisation
pursuant to Article 6 of Directive 73/239/EEC, Article 6 of
Directive 79/267/EEC, Article 3(1) of Directive 93/22/EEC, or
Article 4 of Directive 2000/12/EC, and which are part of a
financial conglomerate.
It also amends the relevant sectoral
rules that apply to these regulated entities.

(2) OJ L 228, 16.8.1973, p. 3. Directive last amended by Directive
2000/26/EC of the European Parliament and of the Council (OJ L
181, 20.7.2000, p. 65).

(3) OJ L 63, 13.3.1979, p. 1. Directive last amended by Directive
(OJ L

95/26/EC of the European Parliament and of the Council
168, 18.7.1995, p. 7).

(4) OJ L 228, 11.8.1992, p. 1. Directive last amended by Directive
2000/64/EC of the European Parliament and of the Council (OJ L
290, 17.11.2000, p. 27).

(5) OJ L 360, 9.12.1992, p. 1. Directive last amended by Directive

2000/64/EC.

(6) OJ L 141, 11.6.1993, p. 1. Directive last amended by Directive
(OJ L

98/33/EC of the European Parliament and of the Council
204, 21.7.1998, p. 29).

(7) OJ L 141, 11.6.1993, p. 27. Directive last amended by Directive

2000/64/EC.

(8) OJ L 330, 5.12.1998, p. 1.
(9) OJ L 126, 26.5.2000, p. 1. Directive amended by Directive

2000/28/EC (OJ L 275, 27.10.2000, p. 37).

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Article 2

Definitions

10.

For the purposes of this Directive:

17,

first

(cid:145)participation(cid:146) means a participation within the meaning of
Article
Council Directive
78/660/EEC (2), or the direct or indirect ownership of
20 % or more of the voting rights or capital of an under-
taking;

sentence,

of

1.

2.

3.

institution(cid:146) means a credit

(cid:145)credit
meaning of Article 1(1),
Directive 2000/12/EC;

second

institution within the
subparagraph, of

11.

(cid:145)group(cid:146) means two or more natural or
between whom there are close links;

legal persons

(cid:145)insurance undertaking(cid:146) means an insurance undertaking
within the meaning of Article 6 of Directive 73/239/EEC,
Article 6 of Directive 79/267/EEC, or Article 1(b) of
Directive 98/78/EC;

12.

(cid:145)close links(cid:146) means close links within the meaning of
Article 1(l) of Directive 92/49/EEC, Article 1(m) of
of Directive
Directive
93/22/EEC or Article 1(26) of Directive of 2000/12/EC,
as well as:

92/96/EEC, Article

1(15)

firm(cid:146) means an investment
1(2)

firm within the
(cid:145)investment
meaning
93/22/EEC,
including the undertakings referred to in Article 2(4) of
Directive 93/6/EEC;

of Directive

of Article

4.

(cid:145)regulated entity(cid:146) means a credit institution, an insurance
undertaking or an investment firm;

(a) a situation in which in the opinion of the competent
authorities one or more persons effectively exercise a
dominant influence over another person;

(b) a situation in which persons are linked by a partici-
pation within the meaning of Article 17, first sentence,
of Council Directive 78/660/EEC;

5.

(cid:145)reinsurance undertaking(cid:146) means a reinsurance undertaking
within the meaning of Article 1(c) of Directive 98/78/EC;

(c) or a situation in which persons are linked by a
relationship within the meaning of Article 12(1) of
Directive 83/349/EEC;

6.

7.

8.

9.

(cid:145)sectoral rules(cid:146) mean the Community legislation relating to
the prudential
in
73/239/EEC,
particular
laid
and
79/267/EEC,
2000/12/EC;

in Directives
93/6/EEC,

down
98/78/EC,

regulated entities,

supervision of

93/22/EEC

(cid:145)financial sector(cid:146) means the banking, and/or insurance,
the terms banking,
and/or
investment
insurance, and/or
to
activities provided by natural and/or legal persons that
are covered by sectoral rules;

services
investment

services

sector;

sector

refer

(cid:145)parent undertaking(cid:146) means a parent undertaking within
the meaning
of Council Directive
83/349/EEC (1)
in the
opinion of the competent authorities, effectively exercises
a dominant influence over another undertaking;

of Article
and any undertaking which,

1

(cid:145)subsidiary undertaking(cid:146) means a subsidiary undertaking
within the meaning of Article 1 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 subsidiary undertakings
of
considered
subsidiary undertakings of the parent undertaking;

subsidiary undertakings

also be

shall

13.

(cid:145)financial conglomerate(cid:146) means a group that meets, subject
to Article 3, the following conditions:

(a)

its activities mainly consist
services in the financial sector;

in providing financial

(b) it comprises at

least one regulated entity that has
obtained an authorisation in accordance with Article
6 of Directive 73/239/EEC, Article 6 of Directive
79/267/EEC, Article 3(1) of Directive 93/22/EEC, or
Article 4 of Directive 2000/12/EC;

(c)

it comprises at
undertaking, and at
different financial sector;

least one insurance or reinsurance
least one other entity of a

(d) its cross-sectoral activities in the financial sector as

referred to in (c) are significant;

14.

(cid:145)mixed financial holding company(cid:146) means a parent under-
taking, other than a regulated entity, which together with
its subsidiaries, of which at least one is a regulated entity
that has its head office in the Community, and other
entities, constitutes a financial conglomerate;

(1) OJ L 193, 18.7.1983, p. 1.

(2) OJ L 222, 14.8.1978, p. 11.

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15.

(cid:145)competent authorities(cid:146) mean the national authorities of the
Member States which are empowered by law or regulation
to supervise credit institutions, and/or insurance under-
takings and/or investment firms;

16.

(cid:145)intra-group transactions(cid:146) mean all transactions by which
regulated entities within a financial conglomerate rely
either directly or indirectly upon other entities within the
same group for the fulfilment of an obligation, whether or
not contractual, whether or not for payment;

17.

(cid:145)risk concentration(cid:146) means all exposures with a loss
potential borne by entities within a financial conglomerate,
which are large enough to threaten the solvency or the
financial position in general of the regulated entities in the
financial conglomerate, and which exposures may be
investment risk,
caused by counterparty risk/credit risk,
insurance risk, market risk, other risks, or a combination
or interaction of these risks.

Article 3

Thresholds to determine a financial conglomerate

For the purposes of determining whether the activities of
1.
a group consist mainly in providing financial services within
the meaning of Article 2(13)(a), the ratio of the consolidated
and/or aggregated balance sheet
the regulated and
non-regulated financial sector entities in the group to the
the
consolidated and/or aggregated balance sheet
group as a whole, calculated on the basis of
the annual
accounts, should exceed 50 %.

total of

total of

When a group is headed by a regulated entity, and if the
conditions set out in Article 2(13)(b), (c) and (d) are met, the
group will qualify as a financial conglomerate, regardless of the
group’s ratio.

2.
For the purposes of determining whether activities in
different financial sectors are significant within the meaning
of Article 2(13)(d), the average of the ratio of the balance
sheet total of the smallest financial sector to the consolidated
and/or aggregated balance sheet total of the financial sector
entities in the group, calculated on the basis of the annual
accounts, and the ratio of the solvency requirements of the
smallest financial sector to the total solvency requirements of
the financial sector entities in the group, should exceed 10 %.

The smallest financial sector in a financial conglomerate is the
sector with the smallest average. For the purposes of calcu-
lating the average,
the banking sector and the investment
services sector shall be considered together. The solvency
requirements
shall be calculated in accordance with the
provisions of the sectoral rules and this Directive.

For the application of paragraphs 1 and 2, the competent

3.
authorities concerned may by common agreement decide:

(a) that in the cases referred to in Article 5(4) an entity need

not be included for the calculation of the ratios;

(b) to lower the ratios in order to avoid sudden regime shifts,
that are on the
in the case of groups
in particular
borderline of exclusion from the definition of a financial
conglomerate;

(c)

in a particular case,
to replace the criterion based on
the following
total with one or more of
balance sheet
parameters or to add one or more of these parameters, if
they are of
these parameters are of
particular relevance:
income structure, off-balance sheet
activities.

the opinion that

Article 4

Scope

1. Without prejudice to the provisions on supervision
contained in the sectoral rules, Member States shall provide
the regulated entities
for the supplementary supervision of
referred to in Article 1 that
financial
a
conglomerate, to the extent and in the manner prescribed in
this Directive.

are part of

The following entities shall be subject to supplementary
in

the financial conglomerate,

2.
supervision at
accordance with Articles 5 to 13:

the level of

(a) every regulated entity which is at the head of a financial

conglomerate,

(b) every regulated entity, the parent undertaking of which is a
mixed financial holding company that has its head office in
the Community,

(c) every regulated entity in a financial conglomerate linked by
a relationship within the meaning of Article 12(1) of
Directive 83/349/EEC.

Where a financial conglomerate is a subgroup of another
financial conglomerate that meets the requirements of
the
first subparagraph, Member States may apply the provisions
of Article 5 to 13 to the latter group only and any reference
to the notions
in the Directive
group and financial
then be understood as referring to that
conglomerate will
latter group.

Every

regulated

entity which is not

3.
to
supplementary supervision in accordance with paragraph 2,
the parent undertaking of which is a regulated entity or a
mixed financial holding company, having its head office
outside the Community, shall be subject
to supplementary
supervision at the level of the financial conglomerate to the
extent and in the manner prescribed in Article 14.

subject

4. Where persons hold participations or capital ties in one
or more regulated entities or exercise significant influence over
such entities without holding a participation or capital ties,
other than the cases referred to in paragraphs 2 and 3, the
competent authorities concerned shall determine whether and
to what extent
these entities together with other entities
constitute a financial conglomerate and supplementary super-
vision is to be carried out to the regulated entities.

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The entities referred to in the first subparagraph together must
provide financial services in the financial sector and meet the
(c) and (d). The
conditions set out
competent authorities shall
taking into
account the objectives of the supplementary supervision as
provided by this Directive.

take their decision,

in Article 2(13),

(b),

The exercise of supplementary supervision at the level of
5.
the financial conglomerate shall
the
competent authorities are required to play a supervisory role
in relation to mixed financial holding companies, third country
regulated entities in a financial conglomerate, as well as to
unregulated entities in a financial conglomerate, on a stand
alone basis.

in no way imply that

CHAPTER II

SUPPLEMENTARY SUPERVISION

S e c t i o n 1

Financial position

Article 5

Capital adequacy

1. Without prejudice to the sectoral rules, competent auth-
orities shall exercise a supplementary supervision on the capital
adequacy of the regulated entities in a financial conglomerate
in accordance with the rules laid down in paragraphs 2 to 5, in
section 2, and in Annex I.

the

States or

competent

The Member

require regulated entities

authorities
2.
in a financial
concerned shall
conglomerate to provide own funds at
the
financial conglomerate that are always at least equal to the
capital adequacy requirements as calculated in accordance
with Annex I.

the level of

The Member States or the competent authorities shall also
require regulated entities to have in place adequate capital
adequacy policies at the level of the financial conglomerate,
as well as appropriate internal control mechanisms as regards
capital adequacy.

requirements

and second
referred to in the
The
subparagraph shall be subject to overview by the competent
authorities responsible for the supplementary supervision in
accordance with section 2.

first

Those authorities shall ensure that the calculation referred to in
the first subparagraph is carried out at least once a year, either
by the regulated entities, by the mixed financial holding
company or by the competent authorities.

The regulated entities or the mixed financial holding companies
shall submit to the relevant competent authority either the
calculation results or the relevant data for the calculation.

referred to in the

For the purposes of calculating the capital adequacy
3.
requirements
subparagraph of
paragraph 2, the following entities shall be included in the
scope of supervision: undertakings referred to in Article 7(3)
of Directive 93/6/EEC, undertakings referred to in Article 3(2)

first

insti-
of Directive 98/78/EC and credit institutions, financial
tutions and ancillary banking services undertakings referred
to in Article 1,
(5) and (23), of
(1), second subparagraph,
Directive 2000/12/EC.

States or

The Member

4.
authorities
responsible for exercising supplementary supervision may
decide not to include a particular entity in the scope for calcu-
lating the supplementary capital adequacy in the following
cases:

competent

the

(a)

to the

impediments

if the entity is situated in a third country where there are
the necessary
legal
rules
sectoral
information, without prejudice
regarding the obligation of competent authorities
to
refuse authorisation where the effective exercise of their
supervisory functions is prevented;

transfer of
to the

(b) if the entity is of negligible interest with respect to the
objectives of the supplementary supervision of regulated
entities in a financial conglomerate;

(c)

if the inclusion of the entity would be inappropriate or
misleading with respect to the objectives of supplementary
supervision.

if

However,
pursuant to point (b) of
nevertheless be
non-negligible interest.

several entities are intended to be excluded
the first subparagraph, they must
included when collectively they are of

subparagraph,

When the competent authorities do not include a regulated
entity in the scope under one of the cases provided for in
the first
the
Member State in which that entity is situated may ask the
entity that is at the head of the financial conglomerate for
information which may facilitate their
the
regulated entity.

the competent authorities of

supervision of

If

conglomerate

the level of
requirements

the capital adequacy position at
falls below the

the
5.
financial
as
referred to in the first subparagraph of paragraph 2, or if the
other requirements set out in paragraph 2 are not met, or
where the requirements are met but the solvency may never-
theless be jeopardised, the competent authorities responsible
for the supervision of the regulated entities in the financial
conglomerate shall ensure that these entities and where appro-
priate other entities in the group take the necessary measures
to rectify the situation as soon as possible.

The competent authorities involved shall where appropriate
co-ordinate their supervisory actions.

Article 6

Intra-group transactions and risk concentration

1. Without prejudice to the sectoral rules, competent auth-
shall exercise a supplementary supervision on the
orities
intra-group transactions
concentration of
and the
regulated entities in a financial conglomerate in accordance
with the rules laid down in paragraphs 2 to 6, in section 2,
and in Annex II.

risk

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the

States or

competent

The Member

authorities
2.
concerned shall require regulated entities to have in place
within the financial conglomerate adequate risk management
including sound
processes and internal control mechanisms,
in order to identify,
reporting and accounting procedures,
measure, monitor and control
the intra-group transactions
within a financial conglomerate and the risk concentration at
the level of the financial conglomerate appropriately.

S e c t i o n 2

Measures to facilitate supplementary supervision

Article 7

Competent

authorities

responsible

for

exercising

supplementary supervision (the co-ordinator)

These processes and mechanisms shall be subject to overview
by the competent authorities responsible for the supplementary
supervision.

the

States or

competent

The Member

3.
authorities
concerned shall require regulated entities or mixed financial
holding companies to report on a regular basis and at least
the
annually to the competent authority responsible for
supplementary supervision, all significant
intra-group trans-
actions within a financial conglomerate as well as any
significant risk concentration at
the financial
conglomerate, in accordance with the rules laid down in this
Article and in Annex II.

the level of

These intra-group transactions and risk concentrations shall be
subject to supervisory overview by the competent authorities
responsible for the supplementary supervision in accordance
with section 2.

Pending further co-ordination of Community legislation,
4.
Member States may set quantitative limits or allow their
competent authorities to set quantitative limits, or take other
supervisory measures that would achieve similar objectives,
with regard to intra-group transactions within a financial
conglomerate and risk concentration at
level of a
financial conglomerate.

the

5. Where a financial conglomerate is headed by a mixed
financial holding company,
regarding
intra-group transactions and risk concentration of the largest
financial sector in the financial conglomerate shall apply to that
sector as a whole,
including the mixed financial holding
company.

sectoral

rules

the

6.
If the regulated entities in a financial conglomerate do not
comply with the requirements referred to in paragraphs 2 to 5,
the competent authorities responsible for the supervision of the
regulated entities in the financial conglomerate shall ensure
that these entities and where appropriate other entities in the
group take the necessary measures to rectify the situation as
soon as possible.

Where the intra-group transactions or risk concentrations are a
the
regulated entities’
threat
competent authorities shall take appropriate measures.

financial position,

to the

The competent authorities involved shall where appropriate
co-ordinate their supervisory actions.

1.
In order to ensure a proper supplementary supervision of
the
the
regulated entities
competent authorities concerned shall appoint amongst them
a co-ordinator, where necessary composed of more than one
competent authority, responsible for co-ordination and exercise
of the supplementary supervision.

conglomerate,

financial

in a

The

competent

2.
States
authorities of
concerned, including those of the Member State in which the
seek
mixed financial holding company is
agreement as to who amongst them shall exercise the role of
co-ordinator.

the Member

set up,

shall

In the absence of an immediate agreement, the role of the
co-ordinator shall be exercised by the competent authority or
authorities identified on the basis of the following criteria:

(a) Where a financial conglomerate is headed by a regulated
entity, the task of co-ordinator shall be exercised by the
competent authority that has authorised that regulated
entity pursuant to the relevant sectoral rules;

(b) Where a financial conglomerate is not headed by a
shall be
in

regulated entity,
exercised by
accordance with the following principles:

co-ordinator
authority

competent

identified

task of

the

the

(i) where the parent of a regulated entity is a mixed
financial holding company, the task of the co-ordinator
shall be exercised by the competent authority that has
authorised that entity pursuant to the relevant sectoral
rules;

(ii) where more than one regulated entity with a head
office in the Community have as their parent
the
same mixed financial holding company, and one of
these entities has been authorised in the Member
State in which the mixed financial holding company
is set up, the task of co-ordinator shall be exercised by
the competent authority of the regulated entity auth-
orised in that Member State;

in

to

the

however, where the financial conglomerate’s main
activity is in a different financial sector than that of
the regulated entity authorised in the Member State
referred
the
supplementary supervision shall be exercised by a
the competent authority
co-ordinator composed of
referred to in the
subparagraph and the
first
competent authority that authorised the regulated
entity with the largest balance-sheet total in the most
important financial sector;

subparagraph,

first

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where more than one regulated entity, that are active
in different financial sectors, have been authorised in
the Member State in which the mixed financial holding
company is set up, the task of the co-ordinator shall be
exercised by the competent authority of the regulated
entity active in the most important financial sector;

where the financial conglomerate is headed by more
than one mixed financial holding company set up in
different Member States and there is a regulated entity
in each of these States, the task of the co-ordinator
shall be exercised by the competent authority of the
regulated entity with the largest balance-sheet total if
these entities are in the same financial sector, or by the
competent authority of the regulated entity in the most
important financial sector;

(iii) where more than one regulated entity with a head
office in the Community have as their parent
the
same mixed financial holding company and none of
these entities has been authorised in the Member
State in which the mixed financial holding company
is set up, the task of the co-ordinator shall be exercised
by the
authorised the
regulated entity with the largest balance-sheet total in
the most important financial sector;

authority that

competent

(iv) where the financial conglomerate is a group without a
the
parent undertaking at
co-ordinator
shall be exercised by the competent
authority that authorised the regulated entity with
the largest balance-sheet total in the most important
financial sector.

the task of

the top,

3.
The co-ordinator for the supplementary supervision with
regard to a financial conglomerate shall inform the competent
authorities of
the other Member States involved and the
Commission of its identification.

Article 8

Tasks of the co-ordinator

The tasks to be carried out by the co-ordinator with

1.
regard to the supplementary supervision shall include:

(a) the

co-ordination of gathering and dissemination of
information in going concern and
relevant or essential
emergency situations,
including the dissemination of
information that is of importance for a competent auth-
ority’s supervisory task under sectoral rules;

(b) the assessment of the financial situation, and the overview
and monitoring of the compliance with the rules on capital
adequacy and of risk concentration and intra-group trans-
actions as set out in Articles 5 and 6;

(d) the planning and co-ordination of supervisory activities in
in
going concern as well as in emergency situations,
co-operation with the
authorities
involved.

competent

relevant

to facilitate the supplementary supervision,

the
In order
co-ordinator,
the competent authorities responsible for the
sectoral group-wide supervision of the regulated entities in a
financial conglomerate and where relevant other competent
authorities concerned shall have co-ordination arrangements
in place. The
confine
additional tasks to the co-ordinator.

co-ordination arrangement may

legislation,

2. Without prejudice to the possibility to delegate specific
supervisory competences and responsibilities as provided by
Community
co-ordinator
entrusted with specific tasks on the supplementary supervision
of regulated entities in a financial conglomerate does not affect
the tasks and responsibilities of the competent authorities as
provided by the sectoral rules.

the presence of

a

Article 9

Co-operation and exchange of

information between

competent authorities

in a

financial

conglomerate

regulated entities

The competent authorities responsible for the supervision
1.
shall
of
respective
co-operate closely. Without prejudice to their
responsibilities as defined under sectoral rules,
these auth-
orities, whether or not established in the same Member State,
shall provide one another with any information which is
essential or relevant for the exercise of the other competent
authorities’ supervisory tasks, as well as the co-ordinator with
any information which is relevant for the exercise of his tasks
as defined in Article 8. In this regard, competent authorities
shall communicate on request all relevant information and shall
communicate on their own initiative all essential information.

This co-operation shall at least provide for the gathering and
the exchange of information with regard to the following items:

(a)

identification of the group structure, of all major entities
belonging to the financial conglomerate, as well as of the
competent authorities of the regulated entities in the group;

(b) the financial conglomerate’s strategic policies,

including

important acquisitions and restructurings;

(c)

the financial situation of
particular on capital adequacy,
risk concentration and profitability;

the financial conglomerate,

in
intra-group transactions,

(d) the

financial
management;

conglomerate’s major

shareholders

and

(c)

the assessment of the financial conglomerate’s structure,
organisation and internal control systems;

(e)

the organisation, risk management and internal control
systems at financial conglomerate level;

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(f) procedures for the collection of

information from the
entities in a financial conglomerate, and the verification
of this information;

way imply that the competent authorities are required to play a
supervisory role in relation to these entities standing alone.

(g) adverse developments in regulated entities or in other
entities of the financial conglomerate that could seriously
affect the regulated entities;

(h) major

sanctions

taken by
competent authorities in accordance with sectoral rules
or the provisions of this Directive.

and exceptional measures

The competent authorities may also exchange information with
the following authorities as may needed for the performance of
their respective tasks, regarding regulated entities in a financial
conglomerate,
in line with the provisions laid down in the
rules: central banks, other bodies with a similar
sectoral
function in their capacity as monetary authorities, and where
appropriate other
for overseeing
payment systems.

responsible

authorities

The competent authorities concerned shall prior
to their
decision consult each other with regard to the following
items, where these decisions are of
importance for other
competent authorities’ supervisory tasks:

(a) changes in the shareholder, organisational or management
structure of regulated entities in a financial conglomerate,
that require the approval or authorisation of competent
authorities;

(b) major

sanctions or
competent authorities.

exceptional measures

taken by

A competent authority may in exceptional circumstances
decide not to exchange particular information or to consult,
if this is considered to be inappropriate under these exceptional
circumstances.

2.
The co-ordinator may invite the competent authorities of
the Member State in which a parent undertaking is located, and
which do not themselves exercise the supplementary super-
vision pursuant to Article 7, to ask the parent undertaking
for any information which would be relevant for the exercise
of its co-ordination tasks as laid down in Article 8, and to
transmit that information to the co-ordinator.

Where the information referred to in Article 11(2) has already
been given to a competent authority in accordance with
sectoral rules, the competent authorities responsible for exer-
cising supplementary supervision may address themselves to
the former authority for obtaining the information.

shall authorise the exchange of

the
3. Member States
information between their competent authorities and between
their competent authorities and other authorities, as referred to
in paragraphs 1 and 2. The collection or possession of
information with regard to an entity within a financial
conglomerate which is not a regulated entity does not in any

Information received in the framework of the supplementary
supervision and in particular any exchange of
information
between competent authorities and between competent auth-
orities and other authorities which is provided for in this
Directive, shall be subject to the provisions of professional
information laid
secrecy and communication of confidential
down in the sectoral rules.

Article 10

Internal control mechanisms

The competent authorities shall ensure that in all undertakings
included in the scope of supplementary supervision pursuant
to Article 4, there are adequate internal control mechanisms
for the production of any data and information which would
be relevant for the purposes of the supplementary supervision.

Article 11

Access to information

there are no legal
shall ensure that
1. Member States
impediments within their jurisdiction preventing the natural
the
and legal persons
them-
supplementary supervision from exchanging amongst
selves any information that would be
the
purposes of supplementary supervision.

included within the

scope of

relevant

for

2. Member States shall provide that their competent auth-
orities responsible for exercising supplementary supervision
shall, by approaching the entities in a financial conglomerate
either directly or indirectly, have access to any information that
would be relevant for the purposes of supplementary super-
vision.

Article 12

Verification

Where, in applying this Directive, competent authorities wish
in specific cases to verify the information concerning an entity,
regulated or not, that is part of a financial conglomerate and is
situated in another Member State, they shall ask the competent
authorities of that other Member State to have the verification
carried out.

The authorities which receive such a request shall, within the
framework of their competence, act upon it either by carrying
the verification themselves, by allowing an auditor or
out
expert
to carry it out, or by allowing the authority who
made the request to carry it out itself.

Where the competent authority who made the request does
not carry out the verification itself, it may ask to participate
in the verification.

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Article 13

Additional powers of the competent authorities

1.
Pending further harmonisation between sectoral rules, the
Member States shall provide that their competent authorities
shall have the power to take any supervisory measure deemed
necessary in order to avoid or to deal with the circumvention
of
financial
regulated
sectoral
conglomerate.

rules by

entities

in a

2. 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 mixed financial holding companies, or
their effective managers,
regulation or
administrative provisions enacted to implement the provisions
of this Directive. In certain cases, such measures may require
the intervention of courts. The competent authorities shall
co-operate
above-mentioned
penalties or measures produce the desired results.

infringe laws,

to ensure

closely

that

that

the

S e c t i o n 3

Third countries

Article 14

Parent undertakings outside the Community

the regulated entities,

to the provisions of

in the case
1. Without prejudice to the sectoral rules,
referred to in Article 4(3) competent authorities shall verify
whether
the parent undertaking of
which has its head office outside the Community, are subject
to supervision by a third country competent authority, that is
this Directive on the
equivalent
supplementary supervision of regulated entities referred to in
Article 4(2). The verification shall be done by the competent
authority that would be responsible for the supplementary
supervision if paragraph 2 would apply. The Member State
shall notify the Commission and the other Member States of
each case of equivalent supervision it has recognised or intends
to recognise. If within two months of Member States and the
Commission having been so notified an objection is raised by a
Member State or the Commission on the equivalence of such
supervision, the Commission shall subject the matter to the
procedure referred to in Article 17(2). The Member State
concerned shall take the appropriate measures to implement
the decisions taken in accordance with that procedure.

by

the

relevant

and where

conglomerate,

supervision of

responsible for

regulated entities

conglomerate. Those methods must be agreed upon at least
the sectoral
by the competent authorities
in the
group-wide
financial
other
competent authorities concerned. Competent authorities may
in particular require the establishment of a mixed financial
holding company that has its head office in the Community,
and
financial
conglomerate headed by this holding the provisions of this
the
Directive. The methods must achieve the objectives of
supplementary supervision as defined in this Directive and
must be notified to the other Member States and the
Commission, whereupon the procedure set out in paragraph
1 shall apply.

regulated

to the

in the

entities

apply

Article 15

Co-operation with third country competent authorities

1.
Article 25, paragraphs 1 and 2, of Directive 2000/12/EC
and Article 10(a) of Directive 98/78/EC apply mutatis mutandis
for the negotiation of agreements with one or more third
countries regarding the means of exercising supplementary
supervision of regulated entities in a financial conglomerate.

2.
The Commission, the Banking Advisory Committee and
the Insurance Committee shall examine the outcome of the
negotiations referred to in paragraph 1 and the resulting
situation.

CHAPTER III

POWERS CONFERRED ON THE COMMISSION AND
COMMITTEE PROCEDURE

Article 16

Powers conferred on the Commission

The Commission shall adopt, in accordance with the procedure
referred to in Article 17(2), the technical adaptations to be
made to this Directive in the following areas:

(a) clarification of the definitions referred to in Articles 2 and
3, in order to take into account in the application of this
Directive developments on financial markets;

(b) the clarification of the definitions referred to in Articles 2
this

in order to ensure uniform application of

and 3,
directive in the Community;

2.
In the absence of such equivalent supervision, Member
States shall apply to the regulated entities, by analogy, the
provisions with regard to the supplementary supervision of
regulated entities referred to in Article 4(2). As an alternative,
competent authorities may apply one of the methods set out in
paragraph 3.

(c)

the alignment of terminology on and the framing of defi-
nitions in the Directive in accordance with subsequent
Community acts on regulated entities and related matters;

3. Member States may allow their competent authorities to
apply other methods that ensure an appropriate supplementary
financial
supervision

regulated

entities

the

of

in

a

(d) clarification and adaptation of

adequacy
requirements set out in Article 5 and of the technical prin-
in order to take account of
ciples set out in Annex I,
developments on financial markets and prudential
tech-
niques.

capital

the

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Article 17

Committee

(a) a subsidiary of a credit institution or investment firm

authorised in the Community, or

The Commission shall be

1.
Financial
Conglomerates Committee composed of representatives of the
Member States and chaired by the representative of
the
Commission.

assisted by a

2. Where reference is made to this paragraph, the regulatory
procedure laid down in Article 5 of Decision 1999/468/EC
shall apply, in compliance with Articles 7 and 8 thereof.

The period referred to in Article 5(6) of Decision

3.
1999/468/EC shall be three months.

CHAPTER IV

AMENDMENTS TO EXISTING DIRECTIVES

Article 18

Amendments of Directive 73/239/EEC

Directive 73/239/EEC is amended as follows:

1. In Article 8(1)(e) the following subparagraph is added:

(cid:145)Where
the business of an insurance undertaking is
co-directed by persons appointed in a different legal entity
or where persons appointed in a different legal entity have a
material influence on the direction of an insurance under-
taking’s business, the provisions of the first subparagraph
shall apply mutatis mutandis to these persons.(cid:146)

2. The following Article 12a is inserted:

(cid:145)Article 12a

1.
The competent authorities of the other Member State
involved shall be consulted prior to granting an author-
isation to an insurance undertaking which is

(a) a subsidiary of an insurance undertaking authorised in

another Member State, or

(b) a subsidiary of the parent undertaking of an insurance
undertaking authorised in another Member State, or

(c) controlled by the same person, whether natural or legal,
that controls an insurance undertaking authorised in
another Member State.

(b) a subsidiary of the parent undertaking of a credit insti-
tution or investment firm authorised in the Community,
or

(c) controlled by the same person, whether natural or legal,
firm

institution or investment

that controls a credit
authorised in the Community.

The relevant competent authorities

3.
referred to in
paragraphs 1 and 2 shall in particular consult each other
when assessing the suitability of the shareholders and the
reputation and experience of directors involved in the
management of another entity of the same group. They
shall inform each other about all information with regard
to the suitability of shareholders and the reputation and
experience of directors that is of relevance for the other
competent authorities involved, for the granting an author-
isation as well as
the
compliance with operating conditions.(cid:146)

the ongoing assessment of

for

3. In Article 16(1) the following final subparagraph is added:

(cid:145)The solvency margin shall be reduced by holdings in other
reinsurance undertakings, credit
insurance undertakings,
institutions, within the meaning
institutions and financial
the
of Article 1(1) and (5) of Directive 2000/12/EC of
European Parliament and of the Council (*), amounting to
more than 10 % of their capital, as well as subordinated
claims and instruments referred to in this paragraph,
in
Article 18, second subparagraph, point 1, 5th and 6th
indent, of Directive 79/267/EEC and in Articles 35 and
36(3) of Directive 2000/12/EC, which an insurance under-
taking holds in respect of
insurance undertakings, rein-
surance undertakings, credit institutions and financial insti-
in which it has holdings exceeding 10 % of the
tutions,
capital in each case. Where shares in another credit insti-
tution, financial institution, insurance or reinsurance under-
taking are held temporarily for the purposes of a financial
assistance operation designed to reorganise and save that
entity, the competent authority may waive this provision.
Nevertheless, Member States may provide that for the calcu-
the solvency margin on a stand alone basis,
lation of
insurance undertakings subject
to supplementary super-
vision in accordance with Directive 98/78/EC (**) or
Directive 2001/. . ./EC of the European Parliament and of
the Council need not deduct the aforementioned holdings,
subordinated claims and instruments in entities which are
included in the supplementary supervision.

The competent authority of a Member State involved
2.
responsible for the supervision of credit
institutions or
investment firms shall be consulted prior to granting an
authorisation to an insurance undertaking which is

___________
(*) OJ L 126, 26.5.2000, p. 1.
(**) OJ L 330, 5.12.1998, p. 1.(cid:146)

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Article 19

Amendments of Directive 79/267/EEC

Directive 79/267/EC is amended as follows

1. In Article 8(1)(e) the following subparagraph is added:

(cid:145)Where the business of a life insurance undertaking is
co-directed by persons appointed in a different legal entity
or where persons appointed in a different legal entity have a
material influence on the direction of a life insurance under-
taking’s business, the provisions of the first subparagraph
shall apply mutatis mutandis to these persons.(cid:146)

2. The following Article 12a is inserted:

(cid:145)Article 12a

1.
The competent authorities of the other Member State
involved shall be consulted prior to granting an author-
isation to a life insurance undertaking which is

(a) a subsidiary of a life insurance undertaking authorised in

another Member State, or

(b) a subsidiary of the parent undertaking of a life insurance
undertaking authorised in another Member State, or

(c) controlled by the same person, whether natural or legal,
that controls a life insurance undertaking authorised in
another Member State.

The competent authority of a Member State involved
2.
responsible for the supervision of credit
institutions or
investment firms shall be consulted prior to granting an
authorisation to a life insurance undertaking which is

(a) a subsidiary of a credit institution or investment firm

authorised in the Community, or

(b) a subsidiary of the parent undertaking of a credit insti-
tution or investment firm authorised in the Community,
or

(c) controlled by the same person, whether natural or legal,
firm

institution or investment

that controls a credit
authorised in the Community.

The relevant competent authorities

3.
referred to in
paragraphs 1 and 2 shall in particular consult each other

when assessing the suitability of the shareholders and the
reputation and experience of directors involved in the
management of another entity of the same group. They
shall inform each other about all information with regard
to the suitability of shareholders and the reputation and
experience of directors that is of relevance for the other
competent authorities involved, for the granting of an auth-
orisation as well as for the ongoing assessment of
the
compliance with operating conditions.(cid:146)

3. In Article 18 the following subparagraph is added:

and of

the European Parliament

The solvency margin shall be reduced by holdings in
(cid:145)4.
reinsurance undertakings,
insurance undertakings,
other
credit
institutions, within the
institutions and financial
meaning of Article 1(1) and (5) of Directive 2000/12/EC
the Council (*),
of
amounting to more than 10 % of their capital, as well as
subordinated claims and instruments referred to in this
paragraph, in Article 16 (1), second subparagraph, 7th and
8th indent, of Directive 73/239/EEC, and in Articles 35 and
36(3) of Directive 2000/12/EC, which an insurance under-
taking holds in respect of
insurance undertakings, rein-
surance undertakings, credit institutions and financial insti-
tutions in which it has holdings exceeding 10 % of
the
capital in each case. Where shares in another credit insti-
tution, financial institution, insurance or reinsurance under-
taking are held temporarily for the purposes of a financial
assistance operation designed to reorganise and save that
entity, the competent authority may waive this provision.
Nevertheless, Member States may provide that for the calcu-
the solvency margin on a stand alone basis,
lation of
insurance undertakings subject
to supplementary super-
vision in accordance with Directive 98/78/EC (**) or
Directive 2001/. . ./EC of the European Parliament and of
the Council need not deduct the aforementioned holdings,
subordinated claims and instruments in entities which are
included in the supplementary supervision.

___________
(*) OJ L 126, 26.5.2000, p. 1.
(**) OJ L 330, 5.12.1998. p. 1.(cid:146)

Article 20

Amendment of Directive 92/49/EEC

In Article 15 of Directive 92/49/EEC the following paragraph
(1a) is inserted:

If

the holdings

the acquirer of

(cid:145)(1a)
referred to in
paragraph 1 is an insurance undertaking, a credit insti-
firm authorised in another
tution or an investment
Member State, or
the parent undertaking of such an
entity, or a natural or legal person controlling such an
entity, and if, as a result of that acquisition, the undertaking
in which the acquirer proposes to hold a holding would
become a subsidiary or subject
the
to the control of
acquirer,
the acquisition must be
subject of
the prior consultation referred to in Article
12a of Directive 73/239/EC.(cid:146)

the assessment of

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Article 21

2. In Article 6 the following paragraphs are added:

Amendments of Directive 92/96/EEC

In Article 14 of Directive 92/96/EEC the following paragraph
(1a) is inserted:

If

the holdings

the acquirer of

(cid:145)(1a)
referred to in
paragraph 1 is an insurance undertaking, a credit insti-
firm authorised in another
tution or an investment
Member State, or
the parent undertaking of such an
entity, or a natural or legal person controlling such an
entity, and if, as a result of that acquisition, the undertaking
in which the acquirer proposes to hold a holding would
to the control of
become a subsidiary or subject
the
acquirer,
the acquisition must be
subject of
the prior consultation referred to in Article
12a of Directive 79/267/EC.(cid:146)

the assessment of

Article 22

Amendment of Directive

In Article 7(3) of Directive 93/6/EEC the first and the second
indent are replaced by the following:

(cid:145)(cid:151) financial holding company shall mean a financial insti-
tution the subsidiary undertakings of which are either
exclusively or mainly investment
firms or other
financial
least of which is an
investment firm, and which is not a mixed financial
holding company within the meaning of Directive
2001/. . ./EC of the European Parliament and of the
Council (*),

institutions one at

(cid:151) mixed-activity holding company shall mean a parent
undertaking, other than a financial holding company
or an investment firm or a mixed financial holding
company within the meaning of Directive 2001/. . ./EC,
least one
the
investment firm.

subsidiaries of which include

at

___________
(*) OJ L . . .(cid:146)

Article 23

Amendments of Directive 93/22/EC

Directive 93/22/EC is amended as follows:

1. In the first subparagraph of Article 3(3)
sentence is added to the second indent:

the following

(cid:145)The competent authority of a Member State involved
responsible for the supervision of credit
institutions or
to
shall
insurance undertakings
granting an authorisation to an investment firm which is:

consulted prior

be

(a) a subsidiary of a credit institution or insurance under-

taking authorised in the Community, or

(b) a subsidiary of the parent undertaking of a credit insti-
insurance undertaking authorised in the

tution or
Community, or

(c) controlled by the same person, whether natural or legal,
that controls a credit institution or insurance under-
taking authorised in the Community.

The relevant competent authorities referred to in the first
and second paragraph shall in particular consult each other
when assessing the suitability of the shareholders and the
reputation and experience of directors involved in the
management of another entity of the same group. They
shall inform each other about all information with regard
to the suitability of shareholders and the reputation and
experience of directors that is of relevance for the other
competent authorities involved, for the granting of an auth-
orisation as well as for the ongoing assessment of
the
compliance with operating conditions.(cid:146)

3. Article 9(2) is replaced by the following:

If the acquirer of the holding referred to in paragraph
(cid:145)2.
1 is an investment firm, a credit institution or an insurance
undertaking authorised in another Member State, or the
parent undertaking of an investment firm, credit institution
or insurance undertaking authorised in another Member
State, or a person controlling an investment firm, credit
institution or insurance undertaking authorised in another
Member State, and if, as a result of that acquisition, the
undertaking in which the acquirer proposes to acquire a
holding would become the acquirer’s subsidiary or come
under his control, the assessment of the acquisition must
be the subject of the prior consultation provided for in
Article 6.(cid:146)

Article 24

Amendments of Directive 98/78/EC

Directive 98/78/EC is amended as follows:

1. In Article 1 the points (g), (h), (i) and (j) are replaced by the

following:

(cid:145)Where the business of an investment firm is co-directed by
legal entity or where
persons appointed in a different
persons appointed in a different
legal entity have a
material influence on the direction of an investment firm’s
business, these provisions shall apply mutatis mutandis to
these persons.(cid:146)

(cid:145)(g) (cid:147)participating undertaking(cid:148) means an undertaking which
is either a parent undertaking or other undertaking
which holds a participation, or an undertaking linked
with another undertaking by a relationship within the
meaning of Article 12(1) of Directive 83/349/EEC;

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(h) (cid:147)related undertaking(cid:148) means either a subsidiary or other
undertaking in which a participation is held, or under-
taking linked with another undertaking by a relationship
within the meaning of Article 12(1) of Directive
83/349/EEC;

(i) (cid:147)insurance holding company(cid:148) means a parent under-
taking the main business of which is to acquire and
hold participations in subsidiary undertakings, where
those subsidiary undertakings are exclusively or mainly
insurance undertakings,
reinsurance undertakings, or
non-member-country insurance undertakings, one at
least of
an
insurance undertaking, and which is not a mixed
financial holding within the meaning of Directive
2001/. . ./EC of
the
Council (*);

the European Parliament and of

such subsidiary

undertakings

being

reinsurance undertaking,

(j) (cid:147)mixed-activity insurance holding company(cid:148) means a
parent undertaking, other than an insurance under-
taking, a non-member-country-insurance undertaking,
a
an insurance holding
a mixed financial holding company
company or
within the meaning of Directive 2001/. . ./EC, which
includes at least one insurance undertaking among its
subsidiary undertakings.

___________
(*) OJ L . . .(cid:146)

2. In Article 6(3) the following sentence is added:

own initiative, for the negotiation of agreements with one
or more third countries regarding the means of exercising
supplementary supervision over:

(a)

insurance undertakings which have as participating
undertakings, undertakings within the meaning of
Article 2 which have their head offices situated in a
third country, and

(b) non-member

insurance undertakings which have as
participating undertakings, undertakings within the
meaning of Article 2 which have their head office in
the Community.

The agreements referred to in paragraph 1 shall

2.
particular seek to ensure both:

in

(a) that the competent authorities of the Member States are
able to obtain the information necessary for
the
supplementary supervision of
insurance undertakings
which have their head office in the Community and
which have subsidiaries or hold participations in under-
takings outside the Community,

(b) that the competent authorities of third countries are
able to obtain the information necessary for
the
supplementary supervision of
insurance undertakings
which have their head office in their territories and
which have subsidiaries or hold participations in under-
takings in one or more Member States.

(cid:145)Where the competent authority who made the request does
not carry out the verification itself, it may ask to participate
in the verification.(cid:146)

The Commission and the Insurance Committee shall
the negotiations referred to in

3.
examine the outcome of
paragraph 1 and the resulting situation.(cid:146)

3. In Article 8(2) the first subparagraph is replaced by the

following:

5. In Annex I, 1 (b) the following paragraph is added:

(cid:145)Member States shall require insurance undertakings to have
in place adequate risk management processes and internal
and
including
control mechanisms,
reporting
sound
to identify, measure,
accounting procedures,
in
monitor and control
paragraph 1 appropriately. Member States
also
require at least annual reporting by insurance undertakings
transactions.
to the competent authorities of significant
These processes and mechanisms
to
overview by the competent authorities.(cid:146)

transactions as provided for

shall be subject

in order

shall

4. The following Article 10a is inserted:

(cid:145)Article 10a

(cid:145)Where there are no capital ties between some of the under-
takings in an insurance group, the competent authority shall
determine which proportional share will have to be taken
account of.(cid:146)

Article 25

Amendments of Directive 2000/12/EC

Directive 2000/12/EC is amended as follows:

1. Article 1 is amended as follows:

(a) Point (9) is replaced by the following:

Co-operation with third countries’ competent auth-
orities

The Commission may submit proposals

1.
to the
Council, either at the request of a Member State or on its

(cid:145)(9) (cid:147)participation for the purposes of supervision on a
consolidated basis(cid:148) shall mean participation within
the meaning of Article 17,
sentence, of
Directive 78/660/EEC, or the ownership, direct or
indirect, of 20 % or more of the voting rights or
capital of an undertaking;(cid:146)

first

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(b) Points (21) and (22) are replaced by the following:

4. Article 16(2) is replaced by the following:

(cid:145)(21)

financial

(cid:147)financial holding company(cid:148) shall mean a financial
institution, the subsidiary undertakings of which
are either exclusively or mainly credit institutions
or
such
subsidiaries being a credit institution, and which
is not a mixed financial holding company within
the
the meaning of Directive 2001/. . ./EC of
European Parliament and of the Council (*);

institutions, at

least one of

(22) (cid:147)mixed-activity holding company(cid:148) shall mean a
parent
undertaking,
financial
institution or a
holding company or a credit
mixed financial holding company within the
meaning of Directive 2001/. . ./EC, the subsidiaries
of which include at least one credit institution;

than a

other

___________
(*) OJ L . . .(cid:146)

2. In Article 6(1), second subparagraph, the following sentence

is added:

(cid:145)Where the business of a credit institution is co-directed by
legal entity or where
persons appointed in a different
persons appointed in a different
legal entity have a
material influence on the direction of a credit instittution’s
business, these provisions shall apply mutatis mutandis to
these persons.(cid:146)

3. In Article 12 the following paragraphs are added:

(cid:145)The competent authority of a Member State involved
responsible for the supervision of insurance undertakings
or investment firms shall be consulted prior to granting
an authorisation to a credit institution which is:

(a) a subsidiary of an insurance undertaking or investment

firm authorised in the Community, or

(b) a subsidiary of the parent undertaking of an insurance
firm authorised in the

investment

undertaking or
Community, or

(cid:145)2.
If the acquirer of the holdings referred to in paragraph
1 is a credit institution, insurance undertaking or investment
firm authorised in another Member State or the parent
undertaking of a credit institution,
insurance undertaking
or investment firm authorised in another Member State or
a natural or legal person controlling a credit institution,
firm authorised in
insurance undertaking or investment
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
to the
control of the acquirer, the assessment of the acquisition
must be subject of the prior consultation referred to in
Article 12.(cid:146)

subject

5. Article 34(2) is amended as follows:

(a) In the first

subparagraph points (12) and (13) are

replaced by the following:

(cid:145)(12) holdings in other credit institutions, financial insti-
insurance and reinsurance undertakings,
tutions,
amounting to more than 10 % of their capital, as
well as subordinated claims, instruments referred to
in Article 35, and instruments referred to in Article
16(1), second subparagraph, 7th and 8th indent, of
second
Directive 73/239/EEC and Article 18,
subparagraph, point 1, 5th and 6th indent, of
institution
Directive 79/267/EEC, which a credit
holds in respect of credit
financial
institutions,
and reinsurance under-
takings, in which it has holdings exceeding 10 %
of the capital in each case;

institutions,

insurance

where shares in another credit institution, financial
insurance or reinsurance undertaking
institution,
are held temporarily for
the purposes of a
financial assistance operation designed to reor-
ganise
competent
authority may waive this provision;

and save

entity,

that

the

(c) controlled by the same person, whether natural or legal,
that controls an insurance undertaking or investment
firm authorised in the Community.

The relevant competent authorities referred to in the first
and second paragraph shall in particular consult each other
when assessing the suitability of the shareholders and the
reputation and experience of directors involved in the
management of another entity of the same group. They
shall inform each other about all information with regard
to the suitability of shareholders and the reputation and
experience of directors that is of relevance for the other
competent authorities involved, for the granting of an auth-
orisation as well as for the ongoing assessment of
the
compliance with operating conditions.(cid:146)

(13) holdings in other credit institutions, financial insti-
tutions, insurance and reinsurance undertakings of
up to 10 % of their capital, as well as subordinated
claims, instruments referred to in Article 35, and
instruments referred to in Article 16(1), second
subparagraph, 7th and 8th indent, of Directive
73/239/EEC and Article 18, second subparagraph,
point 1, 5th and 6th indent, of Directive
79/267/EEC, which a credit
institution holds in
respect of credit institutions, financial institutions,
insurance and reinsurance undertakings, other than
those referred to in point (12), in respect of the
amount of the total of such holdings, subordinated
claims and instruments which exceed 10 % of that
credit institution’s own funds calculated before the
deduction of items in point (12) and this point.(cid:146)

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(b) In the second subparagraph,
replaced by the following:

the first

sentence is

Where these intra-group transactions are a threat to a credit
institution’s
the competent authority
responsible for the supervision of the institution shall take
appropriate measures.(cid:146)

financial position,

(cid:145)Member States may provide that for the calculation of
own funds on a stand alone basis, credit institutions
to supervision on a consolidated basis or to
subject
supplementary
accordance with
in
Directive 2001/. . ./EC, need not deduct their holdings
institutions,
in other
reinsurance undertakings, which are
insurance or
included in the consolidation or
in the scope of
supplementary supervision.(cid:146)

institutions,

supervision

financial

credit

6. Article 54 is amended as follows:

8. In Article 56(7) the following sentence is added:

(cid:145)Where the competent authority who made the request does
not carry out the verification itself, it may ask to participate
in the verification.(cid:146)

9. The following Article 56(a) is inserted:

(cid:145)Article 56(a)

(a)

In paragraph 1 the following third subparagraph is
added:

Third country parent undertakings

(cid:145)In the case in which undertakings are linked by a
relationship within the meaning of Article 12(1) of
Directive 83/349/EEC, the competent authorities shall
determine how consolidation is to be carried out.(cid:146)

(b) In paragraph 4, first subparagraph, the third indent is

deleted.

7. The following Article 55a is inserted:

(cid:145)Article 55(a)

Intra-group transactions with mixed-activity holding
companies

Without prejudice to the provisions of Title V, Chapter 2,
Section 3, of this Directive, Member States shall provide that
where the parent undertaking of one or more credit insti-
tutions is a mixed-activity holding company, the competent
authorities responsible for the supervision of these credit
institutions shall exercise general supervision over trans-
actions between the credit institution and the mixed-activity
holding company and its subsidiaries.

Competent authorities shall require credit
institutions to
have in place adequate risk management processes and
including sound reporting
internal control mechanisms,
and accounting procedures,
in order to identify, measure,
monitor and control transactions with their parent mixed-
activity holding company and its subsidiaries appropriately.
Competent authorities shall require the reporting by the
credit institution of any other significant transaction with
these entities than the one referred to in Article 48. These
procedures and significant transactions shall be subject to
overview by the competent authorities.

the

credit

subject

authority

institution is

Where a credit institution, the parent undertaking of which
is a credit institution or a financial holding company, the
head office of which is outside the Community,
is not
subject
to consolidated supervision according to the
provisions of Article 52, the competent authorities shall
to
verify whether
consolidated supervision by a third country competent
authority that is equivalent with the principles laid down
in Article 52. The verification shall be done by the
for
competent
responsible
consolidated supervision if
second subparagraph
would apply. The Member State shall notify the Commission
and the other Member States of each case of equivalent
consolidated supervision it has recognised or intends to
recognise. If within two months of Member States and the
Commission having been so notified an objection is raised
by a Member State or the Commission on the equivalence
of such supervision,
the
matter
to the procedure laid down in Article 5 of
Decision 1999/468/EC. The Member State concerned shall
take the appropriate measures to implement the decisions
taken in accordance with that procedure.

that would be
the

the Commission shall subject

In the absence of such equivalent supervision, Member
States shall apply to the credit institution by analogy the
provisions of Article 52.

competent

agreed upon by the

As an alternative, Member States may allow their competent
authorities to apply other appropriate supervisory tech-
niques that achieve the objectives of the supervision on a
consolidated basis of credit
institutions. Those methods
authorities
must be
involved. Competent authorities may in particular require
the establishment of a financial holding company that has
its head office in the Community, and apply the provisions
on consolidated supervision on the consolidated position of
that financial holding company. The methods must achieve
the objectives of consolidated supervision as defined in this
chapter and must be notified to the other Member States
and the Commission, whereupon the procedure set out in
the first paragraph shall apply.(cid:146)

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CHAPTER V

FINAL PROVISIONS

Article 26

Transposition

Member States shall bring into force the laws, regulations and
administrative provisions necessary to comply with this
Directive by [. . .] at the latest. They shall forthwith inform
the Commission thereof.

Member States shall determine how such reference is to be
made.

Article 27

Entry into force

This Directive shall enter into force on the 20th day following
that of its publication in the Official Journal of
the European
Communities.

When Member States adopt those provisions, they shall contain
a reference to this Directive or be accompanied by such a
their official publication.
reference on the occasion of

Article 28

Addressees

This Directive is addressed to the Member States.

ANNEX I

CAPITAL ADEQUACY

The calculation of the supplementary capital adequacy of the regulated entities in a financial conglomerate referred to in
Article 5(1) shall be carried out in accordance with the technical principles and one of the methods described in this
Annex.

I. TECHNICAL PRINCIPLES

1. Extent and form of the supplementary capital adequacy calculation

When calculating the supplementary capital adequacy with regard to a financial conglomerate by applying method 1
((cid:145)Accounting consolidation(cid:146)), the own funds and the solvency requirements of the entities in the group shall be
calculated by applying the corresponding sectoral rules on the form and extent of consolidation as laid down in
particular in Article 54 of Directive 2000/12/EC and Annex 1(1), (b), of Directive 98/78/EC.

When applying methods 2 or 3 ((cid:145)Deduction and aggregation(cid:146),
(cid:145)Requirement deduction(cid:146)), the calculation shall take
account of the proportional share held by the parent undertaking or undertaking which holds a participation in
another entity of the group. (cid:145)Proportional share(cid:146) means the proportion of the subscribed capital that is held, directly
or indirectly, by that undertaking.

However, whichever method is used, when the entity is a subsidiary undertaking and has a solvency deficit, or, in the
case of a non-regulated financial sector entity, a notional solvency deficit, the total solvency deficit of the subsidiary
has to be taken into account. Where in this case, in the opinion of the competent authorities, the responsibility of
the parent undertaking owning a share of the capital is limited strictly and unambiguously to that share of the
capital, the competent authorities may give permission for the solvency deficit of the subsidiary undertaking to be
taken into account on a proportional basis.

Where there are no capital ties between entities in a financial conglomerate, competent authorities shall determine
which proportional share will have to be taken account of, taking into account the liability the existing ties give rise
to.

2. Regardless of the method used for the calculation of the supplementary capital adequacy of regulated
entities in a financial conglomerate as laid down in point II, the competent authorities shall ensure that
the following principles will apply:

(i) the multiple use of elements eligible for the calculation of own funds at the level of the financial conglomerate

((cid:145)multiple gearing(cid:146)) as well as any inappropriate intra-group creation of own funds must be eliminated;

in order to ensure the elimination of multiple gearing and the intra-group creation of own funds, competent
authorities shall apply by analogy the relevant principles laid down in the relevant sectoral rules;

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(ii) pending further harmonisation of sectoral rules, the solvency requirements for each different financial sector
represented in a financial conglomerate shall be covered by own funds elements in accordance with the corre-
sponding sectoral rules; only own funds elements that are eligible according to each of the sectoral rules
((cid:145)cross-sector capital(cid:146)) shall qualify for the verification of the compliance with additional solvency requirements
at the financial conglomerate level;

where sectoral rules provide for limits on the eligibility of certain own funds instruments that would qualify as
cross-sector capital, these limits would apply mutatis mutandis when calculating the own funds at the level of the
financial conglomerate;

when calculating the own funds at the level of the financial conglomerate, competent authorities shall also take
into account the effectiveness of the transferability and availability of the own funds across the different legal
entities in the group, given the objectives of the capital adequacy rules;

where, in the case of a non-regulated financial sector entity, a notional solvency requirement is calculated in
accordance with point II of this Annex, notional solvency requirement means the capital requirement such an
entity would have to comply with according to the relevant sectoral rules if it were a regulated entity of that
particular financial sector; a mixed financial holding company shall be treated according to the sectoral rules of
the most important financial sector in the financial conglomerate.

II. TECHNICAL CALCULATION METHODS

Method 1:

(cid:145)Accounting consolidation(cid:146) method

The calculation of the supplementary capital adequacy of the regulated entities in a financial conglomerate shall be
carried out on the basis of the consolidated accounts.

The supplementary capital adequacy shall be calculated as the difference between:

(i) the own funds of the financial conglomerate calculated on the basis of the consolidated position of the group; the

elements eligible are those that qualify in accordance with the relevant sectoral rules;

and

(ii) the sum of the solvency requirements for each different financial sector represented in the group; the solvency
requirements for each different financial sector are calculated in accordance with the corresponding sectoral rules.

The sectoral rules referred to are in particular Directives 2000/12/EC, Title V, Chapter 3, as regards credit institutions,
98/78/EC as regards insurance undertakings, and 93/6/EEC as regards credit institutions and investment firms. In the
case of non-regulated financial sector entities that are not included in the aforementioned sectoral solvency requirement
calculations, a notional solvency requirement shall be calculated.

The difference shall not be negative.

Method 2:

(cid:145)Deduction and aggregation(cid:146) method

The calculation of the supplementary capital adequacy of the regulated entities in a financial conglomerate shall be
carried out on the basis of the accounts of each of the entities in the group.

The supplementary capital adequacy shall be calculated as the difference between:

(i) the sum of the own funds of each regulated and non-regulated entity in the financial conglomerate; the elements

eligible are those that qualify in accordance with the relevant sectoral rules;

and

(ii) the sum of

(cid:151) the solvency requirements for each regulated and non-regulated entity in the group; the solvency requirements

shall be calculated in accordance with the relevant sectoral rules; and

(cid:151) the book value of the participations in other entities of the group.

In the case of non-regulated entities, a notional solvency requirement shall be calculated. Own funds and solvency
requirements shall be taken into account for their proportional share in accordance with point I of this Annex.

The difference shall not be negative.

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Method 3:

(cid:145)Requirement deduction(cid:146) method

The calculation of the supplementary capital adequacy of the regulated entities in a financial conglomerate shall be
carried out on the basis of the accounts of each of the entities in the group.

The supplementary capital adequacy shall be calculated as the difference between:

(i) the own funds of the parent undertaking or the entity at the head of the financial conglomerate; the elements

eligible are those that qualify in accordance with the relevant sectoral rules;

and

(ii) the sum of

(cid:151) the solvency requirement of the parent undertaking or the head referred to in (i), and

(cid:151) the higher of the book value of the former’s participation in other entities in the group and these entities’
solvency requirement; the solvency requirements of the latter shall be taken into account for their proportional
share in accordance with point I of this Annex.

In the case of non-regulated entities, a notional solvency requirement shall be calculated. When valuing the elements
eligible for the calculation the supplementary capital adequacy, participations may be valued by the equity method in
accordance with the option set out in Article 59(2)(b) of Directive 78/660/EEC.

The difference shall not be negative.

Method 4: Combination of methods 1, 2 and 3

Competent authorities may apply a combination of methods 1, 2 and 3, or a combination of two of these methods.

ANNEX II

TECHNICAL APPLICATION OF THE PROVISIONS ON INTRA-GROUP TRANSACTIONS AND RISK
CONCENTRATION

The co-ordinator, the competent authorities responsible for the sectoral group-wide supervision of the regulated entities
in a financial conglomerate and where relevant other competent authorities concerned shall identify and agree with each
other on the type of transactions and risks regulated entities in a particular financial conglomerate shall report in
accordance with the provisions of Article 6(3) on the reporting of intra-group transactions and risk concentration.
When defining the type of transactions and risks, the relevant competent authorities shall take into account the specific
group and risk management structure of the financial conglomerate. In order to identify significant intra-group trans-
actions and significant risk concentration to be reported in accordance with the provisions of Article 6, the relevant
competent authorities shall define appropriate thresholds based on regulatory own funds and/or technical provisions.

When overviewing the intra-group transactions and risk concentrations, competent authorities responsible for
supplementary supervision shall in particular monitor the possible risk of contagion in the financial conglomerate,
the risk of a conflict of interests, the risk of circumvention of sectoral rules, and the level or volume of risks.

Member States may allow their competent authorities to apply at the level of the financial conglomerate the provisions
of the sectoral rules on intra-group transactions and risk concentration, in particular to avoid the circumvention of the
sectoral rules.