CELEX: 51990PC0451
Language: en
Date: 1990-11-22
Title: PROPOSAL FOR A COUNCIL DIRECTIVE RELATING TO THE SUPERVISION OF CREDIT INSTITUTIONS ON A CONSOLIDATED BASIS

14. 12. 90                             Official Journal of the European Communities                              No C 315/15
                                                               II
                                                       (Preparatory Acts)
                                                  COMMISSION
              Proposal for a Council Directive relating to the supervision of credit institutions on a
                                                       consolidated basis
                                                 COM(90) 451 final — SYN 306
                                      (Submitted by the Commission on 9 October 1990)
                                                         (90/C 315/09)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,                           until full coordination is achieved, lay down the method
                                                                   of consolidating such groups, bearing in mind the
                                                                   objective described in this Directive; whereas the
Having regard to the Treaty establishing the European              competent authorities at least must have the means of
Economic Community, and in particular Article 57 (2),              obtaining (from all undertakings within the group) the
first and third sentences thereof,                                 information necessary to carry out their supervisory
                                                                   responsibilities; whereas cooperation between the auth-
                                                                   orities responsible for the supervision of different
                                                                   financial sectors and institutions must be established to
Having regard to the proposal from the Commission,
                                                                   ensure the effective supervision of groups undertaking a
                                                                   range of financial activities;
In cooperation with the European Parliament,
                                                                   Whereas the rules of limiting the risks taken by a credit
                                                                   institution subsidiary on a mixed activity holding
Having regard to the opinion of the Economic and                   company of which it is a subsidiary, as well as those
Social Committee,                                                  taken on the other subsidiaries of this mixed activity
                                                                   holding company, can be established to be particularly
                                                                   helpful; it would seem however preferable to settle this
                                                                   question in a more systematic manner in the framework
Whereas Council Directive 83/350/EEC of 13 June                    of a future directive on the limitation of large exposures;
1983 on the supervision of credit institutions on a
consolidated     basis (*)   established     the   necessary
framework for the introduction of the consolidated
                                                                   Whereas the Member States can furthermore refuse or
supervision of credit institutions; whereas following the
                                                                   withdraw the banking licence in the case of certain
transposition of the abovementioned Directive into the
                                                                   group structures considered inappropriate for the under-
national law of the Member States the principle of
                                                                   taking of banking activities, notably because such
consolidated supervision is applied throughout the
                                                                   structures would not be susceptible to effective super-
Community;
                                                                   vision; whereas in this respect the competent authorities
                                                                   have the powers mentioned in Article 11 of the Second
                                                                   Council Directive 89/646/EEC of 15 December 1989 on
Whereas in order to be effective consolidated supervision          the coordination of laws, regulations and administrative
must be applied to all banking groups, including those             provisions relating to the taking up and pursuit of the
whose parent undertaking is not a credit institution;              business of credit institutions and amending Directive
whereas the competent authorities must have sufficient             77/780/EEC (2) in order to ensure the safe and prudent
legal powers to be able to undertake such supervision;             management of credit institutions;
Whereas in the case of groups with diversified activities          Whereas the Member States can equally apply, to groups
whose parent undertaking controls at least one credit              with structures not covered in this Directive, appropriate
institution subsidiary, the competent authorities must be          techniques of supervision; whereas if such structures
able to assess the situation regarding inter-group credit          become common this Directive should be extended to
within such groups; whereas the Member States can,                 embody them;
(') OJ No L 193, 18. 7. 1983, p. 18.                               O OJ No L 386, 30. 12. 1989, p. 1.
 ---pagebreak--- No C 315/16                              Official Journal of the European Communities                                  14. 12.90
Whereas in principle all undertakings engaging in acti-            HAS ADOPTED THIS DIRECTIVE:
vities designated as banking activities in the Annex to
Directive 89/646/EEC must be included in consolidated
supervision; whereas in consequence the definition of
financial institution must be modified;                                                        Article 1
                                                                                              Definitions
Whereas until further coordination of the own funds
requirements against market risks has been completed,              For the purposes of this Directive:
the competent authorities may continue to exclude from
the scope of consolidated supervision those financial
institutions engaged in activities which are principally           — credit institution means a credit institution within the
subject to market risks and which are subject to                        meaning of the first indent of Article 1 of Council
particular rules of supervision;                                        Directive 77/780/EEC (5),
                                                                   — financial institution means an undertaking other than
Whereas following the adoption of Council Directive                     a credit institution whose principal activity is to
86/635/EEC of 8 December 1986 concerning the annual                     acquire and hold participations or to exercise one or
accounts and the consolidated accounts of banks and                     more of the operations included in numbers 2 to 12
other financial establishments (*) establishing rules of                of the Annex to Directive 89/646/EEC,
consolidation applicable to consolidated accounts
published by credit institutions, it is possible to define
more precisely the methods to be used in prudential                —     financial holding company means a financial
supervision conducted on a consolidated basis;                          institution the subsidiary undertakings (one or more)
                                                                        of which are either exclusively or mainly credit
                                                                        institutions or financial institutions, one at least of
                                                                        these subsidiaries being a credit institution,
Whereas the consequent modifications to Directive
83/350/EEC are so considerable that it is preferable that
this should be directly replaced by the present Directive;
                                                                   — mixed-activity      holding company means a parent
                                                                        undertaking other than a financial holding company
                                                                        whose subsidiaries include at least one credit
Whereas the present Directive realizes general objectives               institution,
defined in the Single European Act; whereas it will in
particular      ensure      the     homogenous     application
throughout the Community of prudential rules estab-                — ancillary banking services undertaking means an
lished by other Community legislation which must be                     undertaking whose principal activity consists in
observed on a consolidated basis: Commission recom-                     holding or managing property, managing data-
mendation 87/62/EEC of 22 December 1986 relating                        processing services, or any other similar activity
to the monitoring and control of large exposures of                     which is ancillary to the main activity of one or
credit institutions (2), Council Directive 89/647/EEC of                several credit institutions,
18 December 1989 regarding the solvency ratio of credit
institutions (3) and rules harmonized by Directive
89/646/EEC; whereas the present Directive is of                    — participation means the ownership, direct or indirect,
particular importance in order to ensure the correct                    of 20 % or more of the voting rights or capital of an
application of Council Directive 89/299/EEC of                          undertaking,
17 April 1989 defining the own funds of credit
institutions ( 4 );
                                                                   — parent undertaking means a parent undertaking within
                                                                        the meaning of Article 1 (1) of Council Directive
                                                                        83/349/EEC (6),
Whereas it is desirable that agreement should be
reached, on the basis of reciprocity, between the
Community and third countries with a view to allowing              — subsidiary means a subsidiary undertaking within the
the implementation of consolidated supervision on the                   meaning of Articles 1 (1) and 2 of Directive
widest possible geographical scale,                                     83/349/EEC; all subsidiaries of subsidiary under-
                                                                        takings are treated as subsidiaries of the parent
                                                                        undertaking at the top of the group structure,
O    OJ No  L  372, 31. 12. 1986, p. 1.
O    OJ No  L  33, 4. 2. 1987, p. 10.
(») OJ  No  L  386, 30. 12. 1989, p. 14.                            (5) OJ No L 322, 17. 12. 1977, p. 30.
(4)  OJ No  L   124, 5. 5. 1989, p. 16.                             (') OJ No L 193, 18. 7. 1983, p. 1.
 ---pagebreak---  14. 12. 90                             Official Journal of the European Communities                              No C 315/17
— competent authorities means the national authorities                 sheet of the credit institution or the financial holding
     which are empowered by law or regulation to                       company which has the participation or ECU
     supervise credit institutions,                                     10 million; if several enterprises meet the above
                                                                       criteria, they must nevertheless be included in the
— trading book means the proprietary positions defined                 consolidation where they collectively present a
     in Article 2 of Council Directive . . . / . . . /EEC on           non-negligible amount with respect to the goal
     capital adequacy of investment firms and credit                   alluded to above, or
     institutions
                           Article 2                              — if the nature of the business of the credit institution
                                                                       or financial institution in which there is a partici-
                             Scope                                     pation is such that, in the opinion of the competent
                                                                       authorities charged with exercising supervision on a
This Directive shall apply to all credit institutions,                 consolidated basis, the consolidation of its financial
financial holding companies and mixed activity holding                 situation would be inappropriate or misleading, or
companies.
                                                                  — until further coordination of the capital requirements
The institutions permanently excluded by Article 2 of
                                                                       relating to market risks, if the financial institution in
Directive 77/780/EEC, with the exceptions of the
                                                                      which the participation is held is involved in activities
central banks of the Member States, shall be treated as
                                                                       which are principally subject to market risks and it is
financial institutions for the purposes of the Directive.
                                                                       subject to particular rules of supervision; the
                                                                       competent authorities may similarly exclude from
                           Article 3                                   consolidation the trading books of credit or financial
                                                                       institutions in which there is a participation, provided
Supervision on a consolidated basis of credit institutions
                                                                       that those trading books are subject to special rules
               and financial holding companies
                                                                      of supervision.
1.     Any credit institution which has a participation in
another credit or financial institution shall be subject, to      4.     When the competent authorities of a Member State
the extent and in the manner required by Article 5, to            do not exercise supervision on a consolidated basis on
supervision on the basis of the consolidation of its              the basis of the cases provided for in paragraph 3, the
financial situation with that of the institution in which it      parent undertaking shall provide to the competent auth-
has such a participation. This supervision shall be applied       orities of Member States where credit institution subsi-
at least in the areas referred to in paragraphs 5 and 6 of        diaries are situated, on request by the said authorities,
this Article.                                                     information to enable supervision on a consolidated basis
                                                                  to be exercised in accordance with this Directive.
2.     Any financial holding company shall be subject, to
the extent and in the manner required by Article 5, to
supervision on the basis of the consolidation of its              5.     Supervision of solvency and control of large
financial situation with that of the credit institutions and      exposures of a credit institution or a financial holding
financial institutions in which it has a participation. This      company shall be carried out on a consolidated basis in
supervision shall be applied at least in the areas referred       accordance with the provisions of the Community acts in
to in paragraphs 5 and 6 of this Article. This supervision        force. Member States may adopt any adjustments
shall not imply in any way that the competent authorities         necessary to apply these acts to financial holding
have a supervisory role in relation to the financial              companies.
holding company in its own right.
3.     The competent authorities charged with exercising          When the      parent undertaking is a credit institution, its
consolidated supervision pursuant to Article 4 can                submission    to the limits set in Article 12 (1) and (2) of
exclude a credit institution or financial institution from        Directive      89/646/EEC must be supervised and
consolidation:                                                    controlled    on a consolidated basis.
— if the credit institution or financial institution in
    which there is a participation is situated in a               6.     The competent authorities shall ensure the
    non-member country where there are legal                      existence of adequate internal control mechanisms in all
    impediments to the transfer of the necessary infor-           the credit institutions and financial institutions included
    mation, or                                                    in the scope of the consolidated supervision which is
                                                                  exercised on a credit institution or a financial holding
— if the enterprise included is, in the opinion of the            company.
    competent authorities, of only negligible interest in
    regard to the goal of monitoring credit institutions
    and in all cases if the total balance sheet of the credit     7.     Member States may forgo supervision on an indi-
    or financial institution in which there is a partici-         vidual basis of credit institutions that, as parent under-
    pation represents less than the smaller of the                takings, are subject to supervision on a consolidated
    following two amounts: 1 % of the total balance               basis. If the competent authorities do undertake solo
 ---pagebreak---  No C 315/18                            Official Journal of the European Communities                                  14. 12. 90
 supervision of such credit institutions they may, for the         3.    The competent authorities concerned can by
 calculation of own funds, make use of the provision               common agreement waive the rules set out in the first
 contained in Article 2 (1), third subparagraph of                 and second subparagraphs of paragraph 2.
 Directive 89/299/EEC.
 8.    In the case where a credit institution whose parent
 is a credit institution has been authorized and is situated       4.    The agreements referred to in the third
 in another Member State, the competent authorities               subparagraph of paragraph 2 and in paragraph 3 shall
which granted that authorization shall exercise a                 provide for concrete cooperation procedures to be estab-
 sub-consolidated or non-consolidated supervision of this         lished and the transmission of information to be effected,
 credit institution subsidiary.                                   which is necessary for the goals of this Directive to be
                                                                  achieved.
9.     Notwithstanding paragraph 8, the competent auth-
orities responsible for authorizing the subsidiary of a
parent undertaking which is a credit institution may
delegate by way of a bilateral agreement their responsi-                                     Article 5
bility for supervision to the competent authorities which
have authorized and which supervise the parent under-                           Form and extent of consolidation
taking. The Commission shall be kept informed of the
existence and content of such agreements. It shall                 1.   The competent authorities charged with the
forward such information to the other authorities and to          exercise of supervision on a consolidated basis must, for
the Banking Advisory Committee.                                   the purposes of supervision, require full consolidation of
                                                                  credit institutions and financial institutions which are
                                                                  subsidiaries of the parent undertaking or over which the
                           Article 4                              latter effectively exercises a dominant influence in the
                                                                  opinion of the competent authorities. This consolidation
Competent authorities charged with exercising super-              must ensure the supervision on a consolidated basis of at
                vision on a consolidated basis                    least all the activities which are included in the Annex to
                                                                  Council Directive 89/646/EEC.
1.     When the parent undertaking is a credit institution,
supervision on a consolidated basis shall be exercised by
the competent authorities that authorized it under Article
3 of Directive 77/780/EEC.                                        However, pro rata consolidation may be prescribed in
                                                                  the cases where, in the opinion of the competent auth-
2.     When the parent of a credit institution is a financial     orities, the responsibility of the undertaking holding the
holding company, supervision on a consolidated basis              participation is limited to its part of the capital, because
shall be exercised by the competent authorities which             of the responsibilities of other shareholders or members
authorized this credit institution under Article 3 of             whose solvency is considered satisfactory. The responsi-
Directive 77/780/EEC.                                             bility of the other shareholders and members must be
                                                                  clearly established, if necessary by means of formal,
                                                                  signed commitments.
However when credit institutions authorized in more
than one Member State have for their parent the same
financial holding company, supervision on a consolidated
basis shall be undertaken by the competent authorities of
the credit institution authorized in the Member State             2.    The competent authorities charged with the
where the financial holding company has been set up.              exercise of supervision on a consolidated basis must, in
                                                                  order to do so, require proportional consolidation of
                                                                  participations in credit institutions and financial
If there is no credit institution subsidiary in the Member
                                                                  institutions managed by an undertaking included in the
State where the financial holding company has been set
                                                                  consolidation together with one or more undertakings
up, the competent authorities of the Member States
                                                                  not included in the consolidation, where the liability of
concerned (including the Member State where the
                                                                  the said undertakings is limited according to the share of
financial holding company has been set up) will seek to
                                                                  the capital held by them.
reach a common agreement as to who amongst them will
exercise supervision on a consolidated basis. In the
absence of such an agreement, supervision on a
consolidated basis will be exercised by the competent
authorities of the credit institution with the biggest            3.    In cases of participations other than those in para-
balance sheet; if this is the same for two or more credit         graphs 1 and 2, or where a significant influence is
institutions, supervision on a consolidated basis shall be        exercised in fact, the competent authorities shall
undertaken by the competent authorities of the credit             determine whether and how consolidation is to be
institution which was authorized first under Article 3 of         carried out. In particular, they may permit or require the
Directive 77/780/EEC.                                             equity method to be used.
 ---pagebreak---  14. 12. 90                            Official Journal of the European Communities                             No C 315/19
4.    Anciliary banking services undertakings shall be           Likewise, the Member States shall authorize the
included in the consolidation in accordance with the             exchange of information between their competent auth-
methods laid down in paragraphs 1, 2 and 3.                      orities provided for in Article 6 on the understanding
                                                                 that the collection or receipt of information does not in
                                                                 any way imply that the competent authorities are super-
                          Article 6                              vising the mixed activity holding company and its subsi-
Information to be supplied by mixed-activity holding             diaries which are not credit institutions.
              companies and their subsidiaries
 1.   Until further coordination of the methods for              4.    Where a credit institution, a financial holding
consolidating, Member States shall provide that the              company or a mixed-activity holding company controls
competent authorities require mixed-activity holding             one or more subsidiary insurance companies or other
companies and their subsidiaries to supply any data or           institutions providing investment services which are
information which would be relevant for the purposes of          subject to licensing arrangements, the competent auth-
supervising credit institutions which are subsidiaries of        orities and the authorities entrusted with the public task
the said mixed-activity holding companies.                       of supervising insurance companies or the said other
                                                                 institutions providing investment services shall cooperate
                                                                 closely. Those authorities shall provide one another with
2.    Member States shall provide that the competent
                                                                 any information likely to simplify their task and to
authorities may themselves carry out, or have carried out
                                                                 ensure supervision of the activity and overall financial
on their behalf by external inspectors, inspections on the
                                                                 situation of the undertakings they supervise.
spot to verify data received from mixed-activity holding
companies and their subsidiaries.
                                                                 5.     Information received as a result of the provisions of
                          Article 7                              this Directive and in particular any exchange of infor-
Measures to facilitate application of supervision on a           mation between competent authorities which is provided
                      consolidated basis                         for in this Directive shall be subject to the obligation of
                                                                 professional secrecy as set out in Article 12 of Directive
                                                                 77/780/EEC.
1.    Member States shall take the necessary steps to
ensure that there are no legal impediments preventing
any credit institution, financial institution, ancillary
banking services undertaking or a subsidiary of the kind         6.    The competent authorities shall establish a list of
covered in Article 6 from supplying to a credit                  financial holding companies they supervise on a
institution, a financial holding company or a mixed-             consolidated basis. This list shall be notified to other
activity holding company which has a participation in it         competent authorities and to the Commission.
information which is necessary for supervision on a
consolidated basis to be effected in accordance with this
Directive.                                                       7.    When in applying this Directive to a credit
                                                                 institution, a financial holding company or a mixed-
2.    When the parent undertaking and the credit                 activity holding company, the competent authorities of
institution/institutions which is/are its subsidiary/            one Member State wish in specific cases to verify the
subsidiaries are situated in different Member States, the        information concerning a credit institution, a financial
competent authorities of each Member State shall                 institution, an ancillary banking services undertaking or
communicate all information which may allow or aid the           a subsidiary of the kind covered in Article 6, situated in
exercise of supervision on a consolidated basis.                 another Member State, they must ask the competent
                                                                 authorities of that other Member State for this verifi-
                                                                 cation to be carried out. The authorities which have
When the competent authorities of the Member State
                                                                 received the request must, within the framework of their
where the parent undertaking is situated do not exercise
                                                                 competence, act upon it either by carrying out the verifi-
supervision on a consolidated basis by virtue of the
                                                                 cation themselves, or by allowing the authorities who
provisions in Article 4 they must obtain from the parent
                                                                 made the request to carry it out, or by allowing an
undertaking the necessary information for supervision on
                                                                 auditor or expert to carry it out.
a consolidated basis and transmit it to the competent
authorities charged with exercising this supervision.
3.    Member States shall permit the exchange between            8.    Without prejudice to cases covered by criminal law,
their competent authorities of the information provided          Member States shall ensure that their respective
for in paragraph 2, it being understood that, in the case        competent authorities may impose on financial holding
of financial institutions or ancillary banking services          companies and mixed activity holding companies or
undertakings, the collection or possession of information        those who effectively direct the business of those
shall not in any way imply that a supervisory function is        financial holding companies which breach legislative,
being exercised on a single basis over those institutions        regulatory or administrative provisions implemented in
by the competent authorities.                                    compliance with this Directive, penalties or measures
 ---pagebreak--- No C 315/20                            Official Journal of the European Communities                              14. 12. 90
aimed specifically at ending observed breaches or the            — that the competent authorities of third countries are
causes of such breaches. In certain cases these measures             able to obtain the necessary information to supervise
may require the intervention of the courts. The                      the parent undertakings whose head office is situated
competent authorities shall cooperate closely in order to            in their territory and which hold participations in
ensure that the abovementioned penalties or measures                 credit institutions or in financial establishments
will produce the due results, especially when the head               situated in one or more Member States.
office of a financial holding company or of a mixed-
activity holding company is not located in the same place        3.    The Commission will examine with the Advisory
as its central administration or its main establishment.         Committee set up under Article 11 of Directive
                                                                 77/780/EEC the result of these negotiations and the
                                                                 situation which ensues.
                           Article 8
                       Third countries
                                                                                           Article 9
1.    The Commission may submit proposals to the                                       Final provisions
Council, whether at the request of a Member State, or
on its own inititative, in order to negotiate agreements          1.   Member States shall implement the provisions
with one or more third countries with the goal of estab-         necessary to comply with the provisions of the present
lishing means of applying supervision on a consolidated          Directive at the latest by 1 January 1993. They shall
basis:                                                           forthwith inform the Commission thereof.
— to credit institutions having a head office in a third         When Member States adopt these provisions, these shall
    country, and                                                 contain a reference to this Directive or shall be accom-
                                                                 panied by such reference at the time of their official
— to credit institutions situated in a third country whose       publication. The procedure for such reference shall be
    parent undertaking, whether a credit institution or a        adopted by Member States.
    financial holding company, has its head office in the
    Community.                                                   2.    Member States shall communicate to the
                                                                 Commission the text of the main provisions which they
2.    The agreements referred to in paragraph 1 tend in          adopt in the field covered by this Directive.
particular to ensure both:
— that the competent authorities of Member States are                                     Article 10
    able to obtain the information necessary to supervise,       Council Directive 83/350/EEC is hereby repealed with
    on a consolidated basis, a credit institution or a           effect from 1 January 1993.
    financial holding company from the Community
    which holds participations in a credit institution or a                               Article 11
    financial institution situated outside the Community,
    and                                                          This Directive is addressed to the Member States.