CELEX: 51992PC0273
Language: en
Date: 1992-06-22
Title: AMENDED PROPOSAL FOR A COUNCIL DIRECTIVE ON MONITORING AND CONTROLLING LARGE EXPOSURES OF CREDIT INSTITUTIONS

No C 175 / 4                               Official Journal of the European Communities                                    11 . 7 . 92
                                                                   II
                                                           (Preparatory Acts)
                                                      COMMISSION
              Amended proposal for a Council Directive on monitoring and controlling large exposures of
                                                           credit institutions
                                                            (92 /C 175 /04)
                                                    COM(92) 273 final — SYN 333
              (Submitted by the Commission pursuant to Article 149 (3) of the EEC Treaty on 22 June 1992)
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,                               the business of credit institutions (5), as last amended by
                                                                        Directive 89/646/EEC (6), for making suggestions to the
                                                                        Commission with a view to coordinating the coefficients
                                                                        applicable in the Member States ;
Having regard to the Treaty establishing the European
Economic Community, and in particular the first and
third sentences of Article 57 (2) thereof,
                                                                        Whereas monitoring and controlling the exposures of a
Having regard to the proposal from the Commission (!),                  credit institution is an integral part of its supervision ;
                                                                        whereas an excessive concentration of exposures through
                                                                        a single client or group of connected clients may result in
                                                                        an unacceptable risk of loss ; whereas such a situation
in cooperation with the European Parliament (2),                        may be deemed to be prejudicial to the solvency of a
                                                                        credit institution ;
Having regard to the opinion of the Economic and
Social Committee (3),
                                                                        Whereas common guidelines for monitoring and
                                                                        controlling exposures of credit institutions were
Whereas this Directive is consistent with the aims set out              introduced initially by Commission Recommendation
                                                                        87 /62 /EEC (7); whereas that instrument was chosen
in the Commission's White Paper on completing the
internal market (4),
                                                                        since it permitted existing systems to be adjusted
                                                                        gradually and new systems to be established without
                                                                        causing dislocation to the banking system of the
                                                                        Community; whereas, with that first phase now over, it
Whereas the essential rules for monitoring should be                    is necessary for a binding instrument to be adopted,
harmonized ; whereas Member States should have the                      applicable to all Community credit institutions ;
option of adopting more stringent provisions than those
provided for by this Directive ;
                                                                        Whereas the monitoring requirement throughout the
Whereas this Directive has been the subject of consul­                  Community should be equivalent as credit institutions in
tation with the Banking Advisory Committee, which is                    a unified banking market are engaged in direct compe­
responsible, pursuant to Article 6 (4) of Council                       tition with one another ; whereas, to that end, the criteria
Directive 77/780 /EEC of 12 December 1977 on the                        applied for determining the concentration of exposures
coordination of laws, regulations and administrative                    should be the subject of legally binding rules at
provisions relating to the taking up and pursuit of                     Community level and cannot be left entirely to the
                                                                        discretion of the Member States ; whereas the adoption
o   OJ No C 123 , 9. 5 . 1991 , p. 18 .
(2) Not yet published.                                                  O OJ No L 322, 17 . 12 . 1977, p . 30 .
(3) OJ No C 339 , 31 . 12 . 1991 , p . 35 .                             (') OJ No L 386, 30 . 12 . 1989, p. 1 .
(4) Doc. COM(85) 310 .                                                  O OJ No L 33, 4. 2 . 1987 , p. 10.
 ---pagebreak---  11 . 7 . 92                               Official Journal of the European Communities                             No C 175 / 5
of common rules will therefore best serve the interests of           the consolidated monitoring of the grouped undertakings
the Community, since it will prevent differences in                  allows for an adequate level of supervision, without the
competitive conditions, while at the same time strength­             imposition of more stringent limits on exposure being
ening the Community's banking system ;                               necessary; whereas under this approach banking groups
                                                                     will also be encouraged to organize their structures in
Whereas, as regards the precise accounting technique to              such a way as to make consolidated monitoring possible,
be used for assessing exposures, reference is made to the            which is a desirable result because it allows a more
provisions of Council Directive 86/635/EEC of 8                      comprehensive level of monitoring to be carried out;
December 1986 on the annual accounts and consolidated
accounts of banks and other financial institutions (') ;
Whereas       Council    Directive      89/647 / EEC    of   18
December 1989 on a solvency ratio for credit
                                                                     Whereas, in order to ensure harmonious application of
                                                                     the Directive, Member States should be allowed to make
institutions (2) contains a list of credit risks which may be        provision for a two-stage application of the new limits ;
incurred by credit institutions ; whereas it is therefore            whereas, for smaller credit institutions, a longer tran­
justified to refer to that list in the definition of exposure
for the purposes of this Directive ; whereas it is not,
                                                                     sitional period may be warranted inasmuch as too rapid
                                                                     an application of the 25 % rule would reduce their
however, appropriate to refer on principle to the                    lending activity too abruptly;
weightings or degrees of risk set out by Directive
89/647/EEC ; whereas those weightings and degrees of
risk have been devised in order to set up a general
solvency requirement to cover the credit risk of credit
institutions ; whereas, in the framework of regulating               Whereas, as regards the risks assumed in respect of two
large exposures , the purpose is to limit the maximum                undertakings whose continued financing is of vital
potential loss that a credit institution may incur through           importance for Portugal's energy supply, the Portuguese
a single client or a group of connected clients ; whereas it         Republic should be given a transitional period until 31
is therefore appropriate to adopt a prudent approach                 December 1998 in order to allow Portuguese credit
involving taking account of the nominal value of                     institutions to undertake a restructuring operation to
exposures, without application of any weightings or                  enable them to maintain, at the end of that period, their
degree of risk;                                                      capacity to finance the said undertakings while
                                                                     respecting the limits laid down in this Directive ;
Whereas , when a credit institution has an exposure to its
own parent undertaking or to other subsidiaries of its
parent undertaking, particular prudence is necessary,
whereas the management of exposures incurred by credit               Whereas implementing powers of the same nature as
institutions must be carried out in a fully autonomous               those which the Council reserved for itself in Directive
manner, with respect to the principles of sound banking              89/299/EEC of 17 April 1989 on the own funds of
management, without regard to any other considerations               credit institutions (3) were granted to the Commission in
beyond these principles ; whereas the provisions of the              Directive 89/646/EEC ;
second Council Directive 89/646/EEC of 15 December
1989 on the coordination of laws, regulations and
administrative provisions relating to the taking up and
pursuit of the business of credit institutions, and                  Whereas, taking account of the specific characteristics of
amending Directive 77/780/EEC, require that where the                the sector in question, it is appropriate to give the
influence exercised by persons holding a qualifying                  committee provided for in Article 22 of Directive
participation in a credit institution directly or indirectly         89/646/EEC the role of assisting the Commission in
is likely to operate to the detriment of the sound and               carrying out the responsibilities conferred on it
prudent management of the institution, the competent                 according to Procedure III, Variant (a) of Council
authorities shall take appropriate measures to put an end            Decision 87/ 373/EEC of 13 July 1987 laying down the
to that situation ; whereas, in the large exposures field,           procedures for the exercise of implementing powers
specific standards should also be laid down with respect             conferred on the Commission (4) ;
to exposures held by a credit institution on its own group
and whereas in such cases more stringent restrictions are
justified than for other exposures ; whereas more
stringent restrictions must, however, not be applied when            Whereas , with regard to the monitoring of large
the parent undertaking is a financial holding company or             exposures concerning activities which are principally
a credit institution and the other subsidiaries are either           subject to market risks, the requisite coordination of
credit or financial institutions or undertakings offering            methods of monitoring can be ensured under a
ancillary banking services, to the extent that all such              Community arrangement regarding capital adequacy of
undertakings are covered by the supervision of the credit            investment firms and credit institutions ; whereas this
institution on a consolidated basis ; whereas in such cases          implies     that,     pending        Community  legislation
C) OJ No L 372, 31 . 12. 1986, p. 1 .                                O OJ No L 124, 5 . 5 . 1989, p. 16 .
C) OJ No L 386 , 30 . 12 . 1989 , p . 14 .                           (4) OJ No L 197 , 18 . 7 . 1987, p . 33 .
 ---pagebreak--- No C 175 / 6                             Official Journal of the European Communities                                   11 . 7 . 92
concerning the abovementioned large exposures, the                 (h) 'exposures' means the assets and off-balance-sheet
monitoring of large exposures relating to activities which             items in Article 6 of Directive 89 /647/EEC and in
are principally subject to market risk, such as the trading            Annexes I and III thereto, without application of the
portfolio, underwriting commitments for the issue of                   weightings or degrees of risk set out in those
securities and claims related to settlement of securities              provisions ; the risks mentioned in Annex III must be
transactions, may be left to the competent authorities of              calculated in accordance with the method set out in
each Member State .                                                    Annex II to that Directive, without application of the
                                                                       weightings for counterparty risk; all elements 100 %
                                                                       of the amount of which is covered by own funds
HAS ADOPTED THIS DIRECTIVE :
                                                                       may, with the approval of the competent authorities,
                                                                       be excluded from the definition of exposures
                                                                       provided that such own funds are not included in the
                                                                       calculation of the solvency ratio and of other moni­
                             Article 1                                 toring ratios laid down in Community acts ;
                                                                       exposures shall not include :
                           Definitions
For the purposes of this Directive :                                   — in the case of foreign exchange transactions,
                                                                            exposures incurred in the ordinary course of
                                                                            settlement during the period of 48 hours after
(a) 'credit institution' means a credit institution as                      payment is made, or
    defined in the first indent of Article 1 of Directive
    77/780 /EEC, including branches in third countries
    of such a credit institution, and any private or public            — in the case of transactions for the sale or
    undertaking, including its branches, which corre­
    sponds to the definition given in the first indent of                   purchase of securities, exposures incurred in the
    Article 1 of Directive 77 / 780 / EEC and which has                     ordinary course of settlement during the period
    been authorized in a third country :                                    of five working days following the time when
                                                                            payment is made, or the securities are delivered,
                                                                           whichever is the earlier ;
(b) 'competent authorities' means the competent auth­
    orities as defined in the ninth indent of Article 1 of
    Directive 92/30/EEC of 6 April 1992 on the super­              (i) 'Zone A' means the zone defined in the second
    vision    of credit     institutions on   a   consolidated
                                                                       indent of Article 2 ( 1 ) of Directive 89/647 /EEC ;
    basis (x);
(c) 'parent undertaking' means a parent undertaking as             (j) 'Zone B' means the zone defined in the third indent
    defined in the seventh indent of Article             1  of
                                                                       of Article 2 ( 1 ) of Directive 89/647 /EEC ;
    Directive 92 / 30/ EEC ;
d) 'subsidiary undertaking' means a subsidiary under­              (k) 'own funds' means the own funds of a credit
    taking as defined in the eighth indent of Article 1 of             institution within the meaning of Directive
    Directive 92 / 30 / EEC ;                                          89/299/EEC ;
(e) 'financial holding company' means a financial
    holding company as defined in the third indent of              (1) 'control' means the relationship between a parent
    Article 1 of Directive 92/30/EEC ;                                 undertaking and a subsidiary, as defined in Article 1
                                                                       of Directive 83 / 349/ EEC, or a similar relationship
                                                                       between any natural or legal person and an under­
(f) 'financial institution' means a financial institution as           taking ;
    defined in the second indent of Article 1 of Directive
    92 / 30 /EEC ;
                                                                   (m) 'group of connected clients' means :
(g) 'ancillary banking services undertaking' means an
     undertaking as defined in the fifth indent of Article 1
    of Directive 92 / 30 / EEC ;
                                                                        (i) either two or more persons , whether natural or
                                                                             legal, who, unless shown otherwise, constitute a
                                                                             single risk because one of them has, directly or
(') OJ No L 110 , 28 . 4 . 1992, p. 52 .                                     indirectly, control over the other or others ; or
 ---pagebreak--- 11 . 7 . 92                               Official Journal of the European Communities                             No C 175 / 7
     (ii) two or more persons, whether natural or legal,            3.     However, exposures exempted under Article 4 (7)
           between whom there is no relationship of control         (a), (b), (c), (d), (f), (g) and (h) may be dispensed from
           as referred to in (i) above but who are to be            reporting within the meaning of paragraph 2 . The
           regarded as constituting a single risk because           reporting frequency laid down in the second indent of
           they are so interconnected that, if one of them          paragraph 2 may be reduced to twice a year in the case
           were to experience financial problems, the other         of other exposures referred to in other points of
           or all of them would be likely to encounter              paragraph 7 and in Article 4 (8), (9) and ( 10).
           repayment difficulties.
                            Article 2                               4.     The competent authorities shall require that every
                                                                    credit     institution   has    sound  administrative  and
                              Scope                                 accounting procedures and adequate internal control
                                                                    mechanisms for identifying and recording all large
                                                                    exposures, and subsequent changes to them, as defined
This Directive shall apply to credit institutions which             and required by this Directive, and for monitoring these
have obtained the authorization referred to in Article 3            exposures against the credit institution's own exposure
of Directive 77 / 7 80 / EEC .                                      policies .
However, Member States need not apply this Directive
to :
                                                                    Where a credit institution takes advantage of the
                                                                    provisions of paragraph 3, it shall keep a record of the
(a) institutions listed in Article 2 (2) of Directive               grounds put forward for at least one year from the event
     77/ 780/ EEC ;                                                 giving rise to the dispensation, in order to enable the
                                                                    competent authorities to verify whether it is justified.
(b) institutions in the same Member State which, as
     defined in Article 2 (4) (a) of Directive
     77/780 /EEC, are affiliated to a central body in that                                      Article 4
     Member State , provided that, without prejudice to
     the application of this Directive to the central body,                            Limits on large exposures
     the whole as constituted by the central body and its
     affiliated institutions is subject to global monitoring.
                            Article 3                                1 . Credit institutions may not incur an exposure to a
                                                                    client or group of connected clients where its value
                                                                    exceeds 25 % of own funds .
                 Reporting of large exposures
 1.     An exposure of a credit institution to a client or
group of connected clients shall be considered to be a              2.     Where that client or group of connected clients is
'large exposure1 where its value is equal to or exceeds             the parent undertaking or subsidiary of the credit
 10 % of its own funds .                                            institution and/or one or more subsidiaries of that parent
                                                                    undertaking, the percentage provided for in paragraph 1
                                                                     shall be reduced to 20 % . However, Member States may
2 . A report of every large exposure within the                      exempt the abovementioned large exposures from this
meaning of paragraph 1 shall be made by the credit                   limit if they provide for specific monitoring of such
institution to the competent authorities. Member States              exposures by other measures or procedures. They shall
shall provide that this reporting is to be carried out, at           inform the Banking Advisory Committee and the
their discretion, in accordance with one of the following            Commission of the         content of those   measures   or
two methods :                                                        procedures.
— notification of all large exposures at least once a
     year, backed up by communication during the year                3.    Credit institutions may not incur large exposures
     of all new large exposures and any increase of                  which, in the aggregate, exceed 800 % of own funds.
     existing large exposures of at least 20 % compared
     with the last communication ,
— notification of all large exposures at least four times a          4. Member States may impose more stringent limits
     year.                                                           than those laid down in paragraphs 1 , 2 and 3 .
 ---pagebreak--- No C 175 / 8                             Official Journal of the European Communities                                  11 . 7 . 92
5 . A credit institution shall comply with the limits laid             institution or with a credit institution which is the
down in paragraphs 1 , 2 and 3 at all times in respect of              parent undertaking or a subsidiary of the lending
its exposures. However, if in an exceptional case                      institution ;
exposures exceed those limits, this must be reported
without delay to the competent authorities which may,
where the circumstances warrant it, allow the credit               (h) asset items and other exposures secured, to the satis­
institution a limited period of time in which to comply                faction of the competent authorities, by collateral in
with the limits .                                                      the form of certificates of deposit issued by the
                                                                       lending institution or by a credit institution which is
                                                                       the parent undertaking or a subsidiary of the lending
                                                                       institution and lodged with either one of them ;
6. Member States may fully or partially exempt from
the application of paragraphs 1 , 2 and 3 exposures
incurred by a credit institution to its parent undertaking,        (i) asset items constituting claims and other exposures
to other subsidiaries of that undertaking or to its own                on credit institutions, with a maturity of one year or
subsidiaries, in so far as those undertakings are included             less, but not constituting such institutions' own funds
in the supervision on a consolidated basis to which the                as defined in Directive 89/299 /EEC ;
credit institution itself is subject, in accordance with
Directive 92 / 30 / EEC or with equivalent standards in            (j) asset items constituting claims and other exposures,
force in a third country.                                              with a maturity of one year or less, on those
                                                                       institutions which are not credit institutions but
                                                                       which meet the terms of Article 8 (2) of Directive
7. Member States may fully or partially exempt the                     89/647 /EEC, and secured in accordance with the
following exposures from the application of paragraphs                 terms of that paragraph ;
1 , 2 and 3 :
                                                                   (k) bills of trade and other similar bills, with a maturity
(a) asset items constituting claims on Zone A central                  of one year or less, bearing the signature of another
     governments and central banks ;                                   credit institution ;
                                                                   (1) bonds defined in Article 22 (4) of Council Directive
(b) asset items constituting claims on the European                    85 /61 1 / EEC, as amended by Council Directive
     Communities ;                                                     88 /220/EEC ;
(c) asset items constituting claims carrying the explicit          (m) pending subsequent coordination, holdings in the
     guarantees of Zone A central governments and                      insurance companies referred to in Article 12 (3) of
     central banks or of the European Communities ;                    Directive 89/646/EEC up to a maximum of 40 % of
                                                                       the own funds of the credit institution acquiring the
                                                                       holding ;
(d) other exposures attributable to, or guaranteed by,
     Zone A central governments and central banks or the           (n) asset items constituting claims on regional or central
     European Communities ;                                            credit institutions with which the lending institution
                                                                       is associated as part of a network by virtue of legal
                                                                       or statutory provisions and which are responsible, in
(e) asset items which constitute claims and other                      accordance with those provisions, for cash clearing
     exposures on Zone B central governments and                       operations within the network ;
     central banks and which are denominated and,
     where applicable, funded in the national currencies
     of the borrowers ;                                            (o) exposures secured, to the satisfaction of the
                                                                       competent authorities, by collateral in the form of
                                                                       securities other than those issued by Zone A central
(f) asset items and other exposures secured, to the satis­             governments or central banks or the European
     faction of the competent authorities, by collateral in            Communities, provided that the securities are not
     the form of Zone A central government or central                  issued by the credit institution itself or its parent
     bank securities , or securities issued by the European            company or one of their subsidiaries, or by the client
     Communities or by the regional or local authorities               or group of connected clients in question. The
     in the Member States for which Article 7 of                       securities given as collateral must be valued on the
     Directive 89/647 /EEC lays down a zero weighting                  basis of market prices and have an excess value over
     as regards solvency ;                                             the exposures guaranteed and either be traded on a
                                                                       stock exchange or be genuinely negotiable and
                                                                       regularly quoted on a market operated under the
(g) asset items and other exposures secured, to the satis­             auspices of recognized stock market operators and
     faction of the competent authorities, by collateral in            allowing, to the satisfaction of the competent auth­
     the form of cash deposits placed with the lending                 orities of the Member State of origin of the credit
 ---pagebreak---  11 . 7 . 92                              Official Journal of the European Communities                              No C 175 /9
      institution, for the establishment of an objective price       8 . Member States may, for the purposes of paragraphs
      which enables the excess value of the securities to be         1 , 2 and 3, apply a weighting of 20 % to asset items
      verified at any time. The required excess value is            constituting claims on regional and local authorities in
       100 % ; however, it is 150 °/o in the case of shares         the Member States and to other exposures to, or
      and 50 % in the case of bonds issued by credit                guaranteed by, such authorities ; however, subject to the
      institutions, regional or local authorities of the            conditions     laid   down    in  Article  7   of   Directive
      Member States other than those referred to in Article         89/647/EEC, Member States may reduce this rate to
      7 of Council Directive 89/647/EEC , and in the case           0 %.
      of bonds issued by the European Investment Bank
      and multilateral development banks as defined in
      Article     2  of   Council    Directive   89 / 647 / EEC .
      Collateral in the form of securities may not
      constitute credit institutions' own funds as defined in
      Directive 89 / 299 / EEC .                                    9. Member States may, for the purpose of paragraphs
                                                                     1 , 2 and 3 , apply a weighting of 20 % to asset items
                                                                    constituting claims and to other exposures on credit
                                                                    institutions with a maturity of over one year but not
(p) mortgage loans on residential property secured, to              more than three years and a weighting of 50 % to asset
      the satisfaction of the competent authorities, by             items constituting claims on credit institutions with a
      collateral as well as transactions in respect of leasing      maturity of over three years, provided that the latter are
      under which the lessor retains full ownership of the          represented by debt instruments issued by a credit
      residential property leased for as long as the lessee         institution and that those debt instruments are, in the
      has not exercised his option to purchase, in both             opinion of the competent authorities, genuinely nego­
      cases up to 50 % of the value of the property                 tiable on a market made up of professional operators and
      concerned. The value of the property shall be                 are subject to daily quotation on this market, or the issue
      calculated, to the satisfaction of the competent auth­        of which has been authorized by the competent auth­
      orities, on the basis of strict valuation standards laid      orities of the Member State of origin of the issuing credit
      down by statute or administrative provisions . The            institution . In no case may any of these items constitute
      valuation shall be performed at least once a year. In         own funds within the meaning of Directive 89/299/EEC.
      this context residential property is defined as a
      residence to be occupied or rented out by the
      borrower :
                                                                    10. By way of derogation from the provisions of the
(q) 50 % of the off-balance-sheet items with a moderate             preceding paragraph and of paragraph 7 (i), Member
      risk as mentioned          in  Annex    I  to    Directive    States may apply a weighting of 20 % to asset items
      89 / 647 / EEC ;                                              constituting claims and other exposures on credit
                                                                    institutions, regardless of their maturity.
(r) subject to agreement by the competent authorities,
      guarantees other than loan guarantees, which have a
      legal or regulatory basis and are given for their
      members by mutual guarantee schemes possessing                11 . Where an exposure to a client is guaranteed by a
      the status of credit institutions as defined in Article 1     third party, or by collateral in the form of securities
      (a), subject to a weighting of 20 % of their amount.          issued by a third party under the conditions set out in
      Member States shall inform the Commission of the              paragraph 7 (o), Member States may :
      use they make of this option in order to ensure that
      it does not involve distortions of competition . No
      later than five years after adoption of this Directive,
      the Commission shall submit to the Council a report
      accompanied, if necessary, by any appropriate                 — deem the exposure to have been incurred to the third
      proposals .                                                        party and not to the client, if the exposure is directly
                                                                         and unconditionally guaranteed by such third party,
                                                                         to the satisfaction of the competent authorities,
(s) off-balance-sheet items with a low risk as mentioned
      in Annex I to Council Directive 89/647 /EEC to the
      extent that an agreement has been concluded with
      the client or group of connected clients under which
      exposure may only be risked provided that it has              — deem the exposure to have been incurred to the third
      been ascertained that it will not lead to the limits               party and not to the client, if the exposure defined in
      applicable under Article 4 ( 1 ), (2) and (3) being                paragraph 7 (o) is guaranteed by collateral under the
      exceeded .                                                         conditions set out therein .
 ---pagebreak--- No C 175 / 10                            Official Journal of the European Communities                                  11 . 7 . 92
12. No later than five years after the date laid down              agreement,     transfer    responsibility  for   monitoring
in Article 8 ( 1 ), the Council will examine, on the basis of      compliance with the obligations set out in Articles 3 and
a report from the Commission, the treatment of the                 4 or in any other Community provision applicable to this
interbank exposures provided for in paragraphs 7 (i), 9            area to the competent authorities which have authorized
and 10. The Council will, if necessary, decide on                  and which monitor the parent undertaking. The
changes to be made but on the basis of a proposal from             Commission and the Banking Advisory Committee shall
the Commission .                                                   be kept informed of the existence and content of such
                                                                   agreements .
                             Article 5                                                        Article 6
   Supervision on a consolidated or unconsolidated basis           Transitional provisions relating to exposures in excess of
                                                                                             the limits
1 . If the credit institution is neither a parent under­           1 . Where, at the time of the publication of this
taking nor a subsidiary, compliance with the obligations           Directive in the Official Journal of the European
set out in Articles 3 and 4 or in any other Community               Communities, a credit institution has already incurred an
provision applicable to this area shall be monitored on an         exposure or exposures exceeding either the large
unconsolidated basis .
                                                                   exposure limit or the aggregate large exposure limits, as
                                                                   referred to in this Directive, the competent authorities
2 . In the other cases, compliance with the obligations
                                                                   shall require the credit institution concerned to take steps
                                                                   to have the exposure or exposures brought into line with
set out in Articles 3 and 4 or in any other Community              the provisions of this Directive .
provision applicable to this area shall be monitored on a
consolidated       basis  in    accordance   with    Directive
92 / 30 / EEC .                                                    2 . The process of having the exposure or exposures
                                                                   brought into line shall be devised, adopted, implemented
                                                                   and completed within the period deemed by the
3 . Member States may waive monitoring of                          competent authorities to be consistent with the principle
compliance with the obligations set out in Articles 3 and          of sound administration and fair competition. The
4 or in any other Community provision applicable to this           competent authorities shall inform the Commission and
area on an individual or subconsolidated basis with                the Banking Advisory Committee of the schedule for the
respect to a credit institution which, as a parent under­          general process adopted.
taking, is subject to monitoring on a consolidated basis
and to any subsidiary of such a credit institution which is        3 . A credit institution may not take any measure
subject to their authorization and supervision and is              which would cause the exposures referred to in
included in the monitoring on a consolidated basis.                paragraph 1 to exceed the level existing at the date of
                                                                   the publication of this Directive in the Official Journal of
                                                                   the European Communities.
The same right of waiver shall be allowed where the
parent undertaking is a financial holding company estab­           4 . The period applicable under paragraph 2 shall
lished in the same Member State as the credit institution,         expire no later than 31 December 2001 . Exposures with
provided that that company is subject to the same moni­            a longer maturity for which the lending institution is
toring as credit institutions.                                     bound to respect the contractual terms may be continued
                                                                   until their maturity.
In both the above cases, if the right of waiver is
exercised , measures must be taken to ensure the satis­            5 . Until 31 December 1998 , Member States may as an
factory allocation of risks within the group.                      option increase the limit laid down in Article 4 ( 1 ) to
                                                                   40 % and the limit provided for in Article 4 (2) to 30 % .
                                                                   In such cases and subject to paragraphs 1 to 4 , the time
4.      Where a credit institution the parent of which is a        limit for bringing the exposures existing at the end of
credit institution has been authorized and is situated in          this period into line with the levels in Article 4 shall
another Member State, the competent authorities which              expire on 31 December 2001 .
granted that authorization shall require compliance with
the obligations set out in Articles 3 and 4 or in any other        6.     In the case of credit institutions whose own funds,
Community provision applicable to this area, on an indi­           within the meaning of Article 2 ( 1 ) of Directive
vidual basis or, when appropriate, a subconsolidated                89 /299/EEC , do not exceed ECU 7 million, and only in
basis .                                                            the case of such institutions , Member States may extend
                                                                   by five years the time limits laid down in paragraph 5 .
                                                                    Member States making use of the provisions of this
5. Notwithstanding paragraph 4, the competent auth­                paragraph shall take measures to prevent distortions of
orities responsible for authorizing the subsidiary of a             competition from occurring and shall inform the
parent undertaking which is a credit institution situated           Commission and the Banking Advisory Committee
in another Member State may, by way of a bilateral                  thereof.
 ---pagebreak---  11 . 7 . 92                             Official Journal of the European Communities                           No C 175 / 11
7. In the cases referred to in paragraphs 5 and 6, an              time limit which the chairman may lay down according
exposure may be considered to be a 'large exposure' if its         to the urgency of the matter. The opinion shall be
value is equal to or exceeds 15 % of own funds .                   delivered by the majority laid down in Article 148 (2) of
                                                                   the Treaty in the case of decisions which the Council is
8 . Until 31 December 2001 , Member States may                     required to adopt on a proposal from the Commission.
substitute for the frequency of notification of large              The votes of the representatives of the Member States
exposures, as referred to in Article 3 ( 1 ), second indent,       within the committee shall be weighted in the manner set
a frequency of at least twice a year.                              out in that Article. The chairman shall not vote .
                                                                   The Commission shall adopt the measures envisaged if
9. Member States may fully or partially exempt from                they are in accordance with the opinion of the
application of Article 4 ( 1 ), (2) and (3) exposures              committee .
incurred by a credit institution consisting of mortgage
loans as defined in Article 1 1            (4) of Directive        If the measures envisaged are not in accordance with the
89/647/EEC concluded within eight years of the date                opinion of the committee, or if no opinion is delivered,
laid down in Article 8 ( 1 ), as well as property leasing          the Commission shall, without delay, submit to the
transactions as defined in Article 11 (5) of Directive             Council a proposal relating to the measures to be taken.
89/647 /EEC concluded within eight years of the date               The Council shall act by a qualified majority.
laid down in Article 8 ( 1 ), in both cases up to 50 % of
the value of the property concerned .                              If, on the expiry of three months from the date of
                                                                   referral to the Council, the Council has not acted, the
10. Without prejudice to the provisions of paragraph               proposed measures shall be adopted by the Commission.
4, Portugal may, until 31 December 1998 , fully or
partially exempt from the application of Article 4(1 ) and                                  Article 8
(3) exposures incurred by a credit institution to Elec­
tricidade de Portugal (EDP) and Petrogal.                                                Final provisions
                              Article 7                            1 . Member States shall bring into force the laws ,
                                                                   regulations and administrative provisions necessary to
                       Subsequent amendments                       comply with this Directive by 1 January 1994. They shall
                                                                   forthwith inform the Commission thereof.
1 . Technical amendments to the following points shall             When Member States adopt these measures, they shall
be adopted in accordance with the procedure set out in             contain a reference to this Directive or be accompanied
paragraph 2 :                                                      by such reference on the occasion of their official publi­
— clarification of definitions to take account of devel­           cation . The methods of making such a reference shall be
      opments on financial markets,                                laid down by Member States .
— clarification         of  definitions to  ensure    uniform      2.    Member     States    shall   communicate    to   the
      application of this Directive,                               Commission the texts of the main provisions of national
                                                                   law which they adopt in the field governed by this
— alignment of the terminology and of the wording of               Directive .
      the definitions with those contained in subsequent
      instruments concerning credit institutions and related       3 . Pending Community legislation governing the
      matters ,                                                    monitoring of large ' exposures concerning activities
— clarification of the exemptions provided for in Article          which are principally subject to market risks on a
                                                                   consolidated or non-consolidated basis , the competent
      4 ( 5) to ( 10).                                             authorities shall treat those large exposures in
                                                                   accordance with methods to be determined by those
2.      The Commission shall be assisted by the committee          authorities, having regard to the particular nature of the
provided for in the first subparagraph of Article 22 (2) of        risks involved .
Directive 89 / 646 / EEC .
The representative of the Commission shall submit to the                                    Article 9
committee a draft of the measures to be taken. The
committee shall deliver its opinion on the draft within a          This Directive is addressed to the Member States .