CELEX: 51974PC2010
Language: en
Date: 1974-12-10
Title: Proposal for a COUNCIL DIRECTIVE on the coordination of laws, regulations and administrative provisions governing the commencement and carrying on of the business of credit institutions (submitted to the Council by the Commission)

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 ---pagebreak--- COMMISSION OP THE EUROPEAN COMMUNITIES
                                                          COM(74)2010 final
                                                          Brussels . 10 December 1974
                                 Proposal for a
                                COUNCIL DIRECTIVE
          on the coordination of laws , regulations and administrative
          provisions governing the commencement and carrying on of the
                         business of credit institutions
                 ( submitted to the Council by the Commission)
  COM(74) 2010 final
 ---pagebreak---                           FINANCIAL CONSEQUENCES
       The organization of meetings of the Committee provided for in
Article 11 of the proposal might give rise to certain expenses ,  However ,
an exact evaluation of these expenses is impo ssible for the time being,
given the fact that the authorities represented in the Committee will bear
a part of the cost which will have to be determined later on .
 ---pagebreak---                                 TABLE OF C0NT3NT3
                                                                   Paires
 1 . Explanatory Memorandum
     I.    Reasons for and objectives of the Directive             1–5
     II . Commentary on the Articles '                             6-14
{         V .
2 , Proposal for a Directive
     - Whereas                                     -              15-18
     - Title I :     Definitions and fields of application
                     ( Articles 1 and 2 )                         19-20
     - Title II :    Provisions applying to credit institutions .
                     having their head office in a Member State
                     and to their branches in other Member States
                     (Articles' 3 to 8 )           •   •          21-27
     - Title III : Branches of institutions having their head
                     offices outside the Community
                     (Article 9 )                                 28
     - Title IV :    General and transitional provisions
                     (Articles 10 to 13 )                         29 - 32
     Title V :       Final provisions
                     ( Article 14 )                               33
                                         I
 ---pagebreak---                          EXPLANATORY   MES-jDSA!TIUM
I. K3A9QTT5 FOR AND OBJECTIVES OF THE DIRECTIVE
1.     This proposal for a Directive is a further move towards the creation
of a common market in banking.    A first step in this direction was taken by-
Directive 73/l83/EEC of 28 June 1973 which implemented the principle of„
non-discrimination in accordance vrith Articles 52 and 59 of the Treaty.
Further integration should n6w be sought through the coordination of . the
most inportajat provisions in the bonking regulations of Member States.
2.     At present , nine largely separate banking systems exist side by side
in the Community.   The aim is to promote their interpenetration alad ehould
be pursued in parallel with efforts to achieve economic and monetary union,
for the proper functioning of the activities of credit institutions through­
out the Community i3 complementary to the free movement of capital . "
Furthermore, approximating monetary policy measures will be a far simpler
matter if they can be directe& ; at credit institutions with a similax struc­
ture . But , in view of the divergences between the legal instruments and
administrative practices governing supervision of the activity in question
in the various countries , there is still a long way to go before attaining
this objective.                         : ,                           ,
3»     It can only be to the advantage of the credit institutions themselves
if the legal instruments and practices are coordinated since this would give
them greater scope for carrying out their operations in the whole of the
common market .  Some institutions , it is " true , through international
cooperation agreements , already operate beyond the purily domestic . frontiers
 ---pagebreak---                                         - 2 -
i»8vt;rthelejs , such coop 3rat ion is based mainly on the idea that national
financial markets should remain separate and that this separation should-
be overcome by agreements that relate , for instance , to the financing of
multinational undertakings or to joint operations in non-member countries ,
each institution confining its usual banking operations to its national
territory.    No real intogrc-tioa can be achieved unless credit institutions
take on a European dimension and , in carrying out transactions on the
mrrke,ts of all Munber States , compete with institutions froa beyond their
own frontiers .
4.      One of the principal aims of coordination which is based on
Article 57 of the Treaty is to meke it easier to set up branches arid for
these branches to operate .      This objective could be attained ultimately,
for example , by making it possible to exempt , as far as possible , credit
institutions that h^.ve already set up a network of branches throughout the -
Community from supervision by eight different host countries while , on the
other hand, making them subject to centralized supervision in the country
of origin alone .    The eventual implementation of the principle of super­
vision in the country of origin would enable banks to operate at European
level while rationalizing significant aspects of their activities'.
5.      Consequently, it will be necessary for the supervisory authorities
to collaborate closely when carrying out their checks to ensure the sound­
ness of credit institutions .      Such collaboration is to be distinguished
from that which could clso be established between the monetary authorities
in the pursuit of economic objectives .        "        ...           ...
                                                                         «•»/•••
                            1
 ---pagebreak---         Moreover , it can be seen that even the stage now reached in inte­
gration in the credit sector , namely the cooperation agreements concluded
"between a great many "banks , makes it impossible for a national authority
acting alone to exercise effective supervision.     Concerted action by the
 supervisory authorities can be effective only if the authorities have
similar instruments to work v;ith and a common view of the objectives to be
attained .
6.      The example just given concerns branches of credit institutions;
it would be desirable if similar measures could be - pplied to subsidiaries .
For the purposes of applying solvency and liquidity ratios this Directive
regards subsidiaries as autonomous institutions .      In order to ensure
greater efficiency in supervising credit institutions which operate in a
                                     /
number of countries a study will have to be made in the future of the
possibility of subjecting subsidiaries to regulations similar to those             ,
governing branches .                                    ,                1
7.      The aims of coordination outlined above ccsinot however be achieved
in one go .  At the outset of the preparatory work, the Commission 's
departments had planned to draw up a draft directive covering all the
major aspects of banking legislation.     But vith the accession of new
Member States , in particular the United Kingdom , in which the banking
legislation was not comparable with that in force in th9 original Member
States , it was no longer possible to continue with this overall approach.
                                                                  /
Consequently, the Co-Emission altered its approach and decided to proceed
step by step , thus making it possible to separate the fields where problems
were likely to be only minor from those where greater difficulties would
arise 'and so achieve more rapid progress .   The final stage of coordination
                                                     [
                                                                        « * * /<> m •
 ---pagebreak---   would not however "be achieved before a long term evolution, the first
  stages of which would "bring relatively modest result si
  8.   ■  For this purpose, within this viewpoint , the field of application
  of the Directive is in principle to include all institutions that can be
  broadly -defined as credit institutions , without however excluding the
  possibility 'of laying down more specific provisions for certain types of '
  specialized institutions in the future .
  9.      The method of multi-stago measures implies that , on a number of
• points , the Directive proposed below merely outlines an - answer to certain
  problems, and on others is confined to laying dotm a programme for measure
  to be taken in the future .   In this context , the Commission attaches parti
  cular importance in the . first instance to the provisions of the Directive
  relating to supervision of solvency and liquidity and secondly, the -
  creation of a contact committee made up of the supervisory authorities .
  10 .    With regard to the first of these provisions it should be stressed
  that applying the principle of supervision in the country of origin would,
  in the final stage , mean that a credit institution with branches in severa
  Menber States would no longer have to fulfil the requirements concerning
  solvency and liquidity in force in e?.ch host country.   In fact , if this
  were not so the institution would frequently have to create funds in its
  branches which would assume the role of own capital , and would be obliged,
  with regard to the operations of the latter , to observe the rule3 in bcth
  the host country and the country of origin .
 ---pagebreak---          It would however be preferable for the institution to be required
to observe only the rules which were in force in the country of origin.
Information concerning its over?JLl activities , i.e. including the data
 for all the branches , would have to be comnunicatsd to the authorities of
the country of origin .   The liquidity and solvency of the institutions as
a whole would be calculated in a centralized manner , and this would have
the effect of promoting both integration and rationalization ( for example ,
liquidity clearance for the institution as a whole ). If there is to be
no distortion of competition between institutions from different; Member
 States , the relationships between certain items in the balance sheets
would be harmonised too in the end .
-11 .    As regards the second vital point of the 'proposal , tho Commission
believes that by creating a contact committee in which the suparvisory
 authorities would be represented , the methods , the' priorities -jad' the '
pace of eventual measures which would have to bo taken in the - future in
 a series of coordinating directives concerning the credit sector would be
 specified.   The creation - of a contact committee could even be regarded as
the main point of this Directive .
 ---pagebreak---  COM'JTNTARY Off TIE ARTICLES
Article 1
       This article defines the Various terms used throughout the directive .
Credit institution : this definition is based on the function performed by
banks , savings banks , credit cooperatives 'and other like institutions ■
concerned with finance in national economies .        The essenti-l task of such
institutions i a to act as a link "between saving and investment , in other
words to receive monies and gr?nt loans .        The fact that monies collected
are repayable distinguishes the activity of the institutions in quest 3 on
from that of insurance or collective investment undertakings , •' These
monies may be in the form of deposits ( sight , terra or savings ), or they
may also exist in other forms , mainly- bonds , cash certificates , etc .     The
term " assets" covers loans , which are the most important form of invest­
ment and of uhich there is an endless variety ( debit accounts, acceptance
credits, t .feTffi] loans, etc . ).
       The' article' specifies that loans must be granted for the account of
the institution itself and thus excludes intermediaries in the banking
sector and the 1 function of transmitting the funds of third parties .
Receiving monies and granting loans must constitute the normal business ,
of the institution, thus excluding commercial undertakings which also
occasionally receive monies from the public and grant loans to their
customers .
Aut ho ri z at i on : This definition covers any form of administrative instrmnen .
giving authorization,; even if such instrument is not termed an " authori­
zation ", but is for example a document of registration or recognition.
 ---pagebreak---   Branch ; The essential purpose of this detinition is to distinguish between
  the institutions in question and subsidiaries , which are legally independent ,
  and representative offices , which do not handle transactions .
                                   \
  Competent authorities ; It was necessary to introduce the overall concept of
  " competent authorities " since "banking supervision is orgrnized in different
  ways in the Member States :    in some cases it is centralized in specialized
  supervisory bodies , in others it is carried out by the central bank, and in
  others it is divided among different authorities .     The definition covers
  all authorities which will apply the national provisions based on the
  directive , which sets out to protect the interests of depositors , i.e. those
  which ascertain the soundness of undertakings in the banking sector .     They
  are to be distinguished from the nonetary authorities even if at times the
  same authorities perform both functions ; banking supervision and control of
  credit .   .
  Article 2
           The field of application laid down in this article is very broad.
  To ensure equal conditions of competition, it 'includes in principle all
  institutions that perform the essential functions of credit institutions
. outlined above , with no distinction being made in respect of the legal
  structure ( for example public or private ), geographical range of activities
  ( local , national , or even international ), any particular specialization,
  types of operation ( short-term, medium- and long-term or universal ),
  economic sector ( agricultural loans , industrial loans, loans to the hotel
  trade , etc . ) or on any other similar grounds . The directive is sufficiently
  general to be applicable to all these institutions .
 ---pagebreak---         There is a "brief list excluding certain institutions to which the
directive obviously cannot apply ( e.g. central "banks ), although they are
in principle covered by the definition of credit institutions .
        It transpired from the preparatory work that the possibility of
exclusion for a limited time should remain open to Member States .    There
axe certain institutions which, although they undeniably belong to the
banking sector , are subject to special legislation or special supervisory
authority, or which for technical or political reasons are not considered
on the same footing as other credit institutions by one or other Member
State .  Equal treatment , while desirable for reasons of competition, and
feasible as regards Community law, nevertheless means , in view of the
general nature of the directive, that Member States'may have to moke special
adjustments , and it is not always possible to take the necessary measures
immediately.
        Provision is made for a special procedure to ensure that the defer­
ment of the application of the directive to certain types or groups of
institutions should not last too long.
Article 3
        Prior authorization to commence activities is not yet required for
credit institutions in all Member States .   This requirement must be made
general so that each host country may be certain that every institution
benefitting from freedom of establishment and freedom of provision of
services has been subjected to certain checks in its country of origin
before commencing its business.                                             -
 ---pagebreak---              In the final stage of a common market in banking, such supervision
  should be conducted in the whole of the Community in accordance with the
  same criteria.      For the time "being, however , all that are given are the
  minimum conditions which each Member State must lay down. •
             As was decided in respect of the allied field' of . insurance , the .
  identical criteria to be used in the final stage should not include an
  examination of technical need and the competeojr authorities should not be
  given discretionary powers to grant authorization .       To - achieve this end ,
  provision has been made for applicants to submit a scheme of operations
  indicating the typos of operations they expect to handle 2nd the planned
  structural organization of the institution' ( paragraph ?. ).      In thi3 way, the
  grounds for decisions of Member States which , for the time being, still take
  technical need into consideration and have . discretionary powers , will be made
  more transparent and will , to some extent , be subject to an initial measure
  of objective legislation.       This does not imply that the other Member States
  are required by virtue of' this provision to regard the information concerning
  the planned operations and structure as the criteria on which to base their
. decision but may simply check that a scheme has been submitted
             The authorized institutions shall bo entered in a Community register ;
  such registration shall not itself be regarded as authorization but merely
  have declaratory effect .
- Articles 4 and 5
     . ... . In the final stage of coordination , once they have been authorized
  in their country of . origin, credit institutions may be considered as being
  authorized throughout the Community and require no further authorization for
  branches established in other Member States .        Initially, however,
 ---pagebreak---                                          - 10 -
   most Member States will have to continue to require credit institutions
- setting up branches for the first time on their territory to undergo
   individual examination.     Just as it was found to "be impossible to harmonize
   all the criteria for the authorization of a new credit institution, it is
   likewise impossible at present to coordinate the criteria for the authori­
   zation of branches .   It is proposed, however , to relax two aspects of the
                             \
   procédure .
           First , the fact that the credit institution in its country of origiii
•' is constituted in a legal form which cannot be used by credit institutions
   In the host country may not be invoked as a ground for refusing authorization .
   This type of mutual recognition of accepted legal forms for credit institutions
   does not , however , apply to a bank formed by one natural person, a type of
   undertaking that is now subject to reservations for reasons of soundness in
   nearly all countries .
           Secondly, Article 5 relaxes the conditions concerning the protection
   of names s each credit institution is free to use the same nsme as that used
   in the country of origin, even if, in an extreme case , it is not in accordance
   with the law of the host country.     The competent authorities in the host
   country may, however , to avoid any danger of confusion liable to distort
   competition, require a more precise description to be added to the name .
   Articles 6 and 7
           These Articles are a first step towards harmonizing banking ratios .
   First , Artiole 6 lists four ratios which should be used by all Member States
   for the purpose of comparison.     However, this list is not exhaustive; Member
   States may continue to enforce other ratios .
                                                                           • « • /• • •
      \
 ---pagebreak---                                        - 11 -
   These axe not fixed rules, therefore, . but initially are merely non-quantified,
  ratios to be applied as an experiment .    The various balance sheet items which
   are to be used in the ratios will likewise not be defined until- a clear :
   picture is available of future developments , as the Commission is aware that
  the ratios given may need to be changed as the structures of the banking
  market changes . For this reason, a general review clause is considered ,v -
  necessary.
           These developments will depend on the joint " experience of . the .super­
  visory authorities and could be discussed initially in the Contact Committee .
  It is obvious that the ratios first specified v/ill need further additions
  -and refinements , the general pattern of which is already emerging. . In
■ particular , it is planned to introduce a xatio "which would reduce the risks
  involved in exchange operations ; in view of recent events on the foreign
  exchange market it could become especially significant in the near future .
          Article 7 deals with the application of the system to branches set
  upby a credit institution in another Member State .      At present , endowment
  capital may still be required for such branches .    In this case , it would be
  appropriate if the Member States concerned would agree that such funds mutt
  bo deducted from the institution 's own funds in the country of origin, unless
  the competent authorities in that country require an overall balance sheet
  to be drawn up showing also the assets and liabilities of the- branch.-'        «
  Article 5     -          •      ^
          This Article lists the grounds for withdrawing authorization.        In
  particular it concerns the case where the credit institution 's own funds
  are no longer adequate ( paragraph 1 , lit . d; this case is specifically
  excluded in paragraph 1 , lit . c, since lit . c refers to initial capital
  and not operating capital ; losses of initial capital are normal in the first
 ---pagebreak---                                           - 12 -
     years of operation ). It was necessary to include a general clause covering
     any infringement of the law ( for example, tax legislation, exchange control
     legislation, etc .), for which the penalty laid down ia the withdrawal of
     authorization .
     Article 9        ' -      '" '
              The Member States take widely differing attitu«.6S to the access of
     hanks from non-member countries .   Policies r^jige from the tightest rdst–
   % rictions to extremely liberal conditions .   The principle that institutions
     of Member States should be treated no less favourably than banks from non-
    member countries is the only possible common denominator in the first stage
 ' of coordination .
           >  It is therefore of vital importance that the Community as such should
     work out a joint approach on this matter in the hear future and apply this
     policy in negotiations with non-member countries for the e2tablishment of
     branches in all Member States .
     Article 10 **                  •' '             :  •    '' • " v         .
              This Article contains provisions making clear the position of existing
     credit institutions and branches under the coordinated legislation,
     Article 11
         .   ;The importance the Commission attaches to collaboration between the
     competent authorities has already been mentioned.      To provide a framework
     for this collaboration a Contact Committee is to.be set up .     The number of
 .. members of the .Committee should be limited to ensure maximum efficiency. .
     In the .view of the Commission, members of the Committee should be persons
, who , in their respective Member States , are responsible for. checking the
 ---pagebreak--- financial soundness of credit institutions and who , in their own administration
hold a position which enables them to take themselves the decisions required
for the collaboration process .
        Among the tasks of the Committee, those listed in paragraph 1 , lit . b
and lit . c are of particular importance .
        The first of these tasks consists in bringing supervisory practices
more closely into : line , for example by arriving at- a more precise definition
of tha relationship between certain items in the balance sheet .
        The Committee does not have the power of decision on . matters of   •
national banking supervision .    Nevertheless , the members of the Committee
should , as far as possible , include discussion within the Committee in their
national decision-making process .
        The second task consists in examining the question,, whenever members
of the Committee find that certain circumstances hinder the approximation
of supervisory practices , whether a coordination measure or some other
action based on the ESC Treaty could remove the difficulty; the Committee "
should forward any relevant suggestions to the Commission which will take
the action it considers desirable .
Article 12
        The purpose of this provision is to solve any problem arising from
the fact that persons employed by the competent authorities are on the one
hand bound by the obligation of professional secrecy and on .the. other
required to collaborate across frontiers and, in certain cases, to exchange
information. In principle such information would retain the confidential
classification accorded by the authority1 in the country of origin. However,
to avoid any conflict between binding rules, in addition to this provision,
 ---pagebreak---                                     - 14 -
a maans must "be found of approximating the legislation involved : represen­
tatives of the competent authorities should not be obliged by their national
laws to disclose information they receive from their counterparts in other
countries where such information is confidential .   They may however be
allowed to dicclose the information provided that express authorization has
been given by the authorities who communicated the information .
Article 13
       This provision guarantees , as is usual in this kind of directive ,
the right of appeal to courts in all Member States. ■
Article 14
       This Article^ contains the u.su-1 final provisions and in particular
specifies the time allowed for the implementation of the Directive : the
Member States have to adhere to a time limit of two years , but , on the
other hand, shall not implement the Directive until eighteen months after
being informed of the deferred implementation of the Directive by ^ some
Member States concerning certain credit institutions .
                                                 !
 ---pagebreak---           Proposal for a Council Directive on the coordination
           of laws , regulations and. administrative provisions
           governing the commencement and carrying on of the
                       business of credit institutions
THE COUITCIL OF TE3 EUROPEAN COIflMTIES ,
Having regard to the Treaty establishing the European Economic Community,
and in particular Article 57 thereof?
Having regard to the proposal from the Commission ;
Having regard to the Opinion of the European Parliament *
Having regard to the Opinion of the Economic and Social Committee ;
Whereas , in order to facilitate the commencement and carrying on of business
by credit institutions , it is necessary to eliminate the most obstructive
differences between the l-ffs of the Member States concerning the regulations
to which these institutions are subject ;
Whereas , hot-fever , it is not possible, given ith3i: !ExterilfeN"''TOf dihdKi;;* ^
differences , to create the conditions required for a common market for
credit institutions through a single Directive ; whereas it is therefore
necessary to proceed by successive stages ; whereas the final result of this
process should enable the competent authorities in a Member State to super-1
vise a credit institution and its branches throughout the Cfimmunity from
the country of its head office ;
Whereas , in order to ensure that credit institutions compete on equal terms ,
the provisions of this Directive should apply to all of these ; whereas their
 field of application should therefore be as wide as possible , although V
 ---pagebreak---                                      - ίβ –
exceptions must be envisaged in the case of certain credit institutions ,
 such as central banks , to which the Directive cannot apply;    .
Whereas , however , the same system of supervision cannot always "be applied
to all types of credit institution; whereas provision should therefore "be
made for application . of the Directive to be deferred in the case of certain
groups or types of institution to which its immediate application would be
difficult for reasons of a technical nature ; ivhereas in the future more
specific provisions covering such institutions may prove necessary;
whereas , however , such specific provisions should be based on a number of
common principles ;                ■
Whereas the eventual aim is to introduce throughout the Community a parallel
authorisation procedure based on uniform requirements - whereas at the
initial stage it is necessary, however , to specify only certain minimum
requirements which all Ilember States should impose ;
Whereas the above aim can be achieved only if assessment criteria which              •
allow certain supervisory authorities particularly wide discretionary
powers are progressively reduced; whereas , from this point of view, the
requirement to produce an operating programme should be seen merely as a
factor enabling the competent authorities to act on the basis of more
precise information, within the - framework of objective criteria;
                                              I                        Ν
Whereas the final objective of coordination is to introduce at a later
stage , in parallel with the progressive attainment of economic and monetary
union, a system whereby tranches of an undertaking which is established
in a Member State will throughout the Community be subject to no authori­
zation requirement ;                                          '    - ,     S  -
Whereas this objective cannot be attained immediately; whereas a certain
degree of flexibility is however possible from the initial stage as regards
the requirements concerning the legal forms of con^iiiai-Sionof credit
institutions and the protection of the use of certain descriptions ;
                                                                         ■ • * /« • •
 ---pagebreak---                                    - 17 -
whereas, until further coordination has teen achieved, national laws shall
remain entirely applicable in respect dif all other matters ;
Whereas the centralization of supervision in the country of origin will be
facilitated if. the financial requirements which the institutions must
satisfy are equivalent ! whereas , even prior to harmonization of the
                                                               κ
accounting information to be provided to the superzi'sory authorities by
credit institutions , a first stop in this direction can be made by drawing
up a list of ratios between certain items in the accounts for observation
purposes and in addition to any other ratios which may be demanded by the
various Member States ; whereaE , moreover , it is necessary to begin without
delay the standardization of the lay-out^of accounts ; whereas , within the
framework of the cooperation referred to below, efforts will be made to
ensure that a system of identically defined and equivalent ratios is          (
progressively established for application in all member countries ; whereas ,
in this connection it would be desirable to make a distinction between
ratios intended to ensure the sound management of credit institutions and
those established for the purposes of economic and monetary policy;
Whereas the miles governing branches of credit institutions having their
head office outside the Community should be parallel in all Member States ;
whereas it is important at the present time to provide ' that such rules may
not be more favourable to such branches than to those of institutions from
another Member State ; whereas it should be specified for future purposes
that the rules applicable to such branches will be defined in agreements
concluded between the Community and the third countries concerned, account
being taken of the principle of reciprocity
                                                   I
Whereas the examination of practical problems posed in the fields covered
by the directives adopted by the Council and applying to credit institutions,
and in particular in order to achieve further coordination, close cooperation
between the competent authorities and the Commission will be necessary withir
                                                                 I.
                    /
 ---pagebreak---                                    - 18 -
a Contact Committse ; whereas it is vital that the authorities achieve in
this framework the closest possible collaboration concerning the super­
vision of credit institutions ;  -
Whereas , moreover , those professionally concerned should be consulted as
to the pattern of future coordination ; whereas the Commission should
envisage the setting up of a Sommittee on which these interests will be
represented;
                                   !*-
HAS ADOPTED THIS DIRECTIVE :
 ---pagebreak---                                   - 19 -
                                TITLE I
                DEFINITIONS AND FIELDS OF APPLICATION
                               Article 1
        For the purposes of this Directive :
" credit institution" means an undertaking whose usual business is to
receive , directly or indirectly, deposits or other repayable monies from
the public and to grant credits for its own account ;
" authorization" means an instrument issued under any form by a public
authority, by which the right to carry on the business of a credit
institution is granted;
"branch" means a place of business which forms a legally dependent part
of a credit institution and which conducts directly the operations
inherent in the business referred to above .   Any number of branches set
up in the same Member State by a credit institution having its head office
in another Member State shall be regarded as a single branch.    Any number
of credit institutions affiliated to a central organization which, under
national regulations , guarantees the totality of their engagements , may
be regarded as branches ;
" competent authorities" means the authorities to which Member States
entrust the application of the laws , regulations and administrative
provisions relating to credit institutions and the supervision of them .
                                                                    • '4 » • t
                  \
 ---pagebreak---                                    Article 2
1,   This Directive applies to the commencement and carrying on of business
by crod.it institutions .
2.   It does not apply to :
– the central banks of Member States ;
– Post Office Giro institutions :
– institutions whose object is to promote regional development in Memoer States
– in Germany , the Kreditanstalt für Wiederaufbau ;
– in France , the Brjnque Française du Commerce Extérieur j
- in the Nethcrlrnds , the 1T.V. Eücport**Financierun£-iiaatschappij , the
   Nederlandss Financieringsmaatschappij voor Ontwikkelingslanden N.V. and
   the Nederlandse Inves teringsbanlc voor Ont wikke lings landen N.V.
3*   Member States may defer application of this Directive to certain types
or groups of credit institutions tirhere immediate application of the coordi­
nated rules would cause technical problems which cannot be overcome in the
short term ,. These problems may result from the fact that those concerns are
submitted to control by an authority different from that normally responsible
for control of banks , or from the fact that they are subjected to a particular
system of control . In any event such deferment cannot be justified by public
law statutes , smallnees of size or limited scope of activity in the particu­
lar institutions concerned * Deferment cm only apply to institutions already
existing at the time of the notification of the directive .
4.   The Seferment qf application under paragraph 3 above shall bo motivated ,
and notified to the Commission by the Member State in question .
Deferment shall be for a period of two years and may be renewed following
consultation of the Committee referred to in Article 11 . It shall take
effect as from its publication in the Offical Journal of the European .
Communities , arhich shall be effected not later than six month following
notification of this . Directive .
On the - recommendation of the Commission, siiich shall consult the said
Committee , the Council shall decide the termination of such deferment by
a Member State .
                                                                   6 • •J • « •
 ---pagebreak---                                   I        - 21 -
            \
                                         TITL3 II
                    PROVISIONS APPLYING 10 CREDIT IFSTITUTIOIIS
                    HAA/IITG THEIR HXAD OFFICE IN A TOIEBR STATE
                  ;JTD TO THEIR BRANCHES ITT OTHER MEMBER STATES
                                         Article 3
  1.       Member States shall provide that credit institutions subject to the
  provisions of this Directive shall have obtained authorization before they
  commence their activities .       They shr-l'l, subject to paragraphs 2 and 3 below,
  determine the requirements for authorization and notify them to the
  Commission .
  2.     . Without prejudice to any other requirements which may be laid down
  under national legislation, the competent authorities sh?.ll not gr?nt
  authorization where : .
  - the credit institution does not possess adequate oi-m funds ;
  - the persons who effectively manage its business are not adequately
     qualified or reputable . '
■ 3.       Member States shall , in addition, require applications for authori­
  zation to be accompanied by a programme of operations in which , in parti­
  cular , the types of business envisaged and the structural organization of
  the institution must be indicated .
  4«       The Committee provided for in Article 11 shall exsmine the definitions
  used by the competent authorities concerning the conditions contained in
  paragraph 2 and the information which should be included in the scheme of
  operations, and shall if necessary propose to the Commission more detailed
  coordination .
                                                                              • • ■ /• « *
 ---pagebreak---  3-     Hansons must ID a given for any refusal of authorisation, and must
"be notified, to the applicant within six months of receipt of the . expli­
cation or , if the latter is incomplete , not later than six months
 following recoipt of documents containing all the information required
under the provisions in force .
 6 ->   Every authorization or refusal shall be notified to the Commission.
Each credit institution shall he entered in a list to be published in the
Official. Journal of the European Communities and to be maintained by the
 Comai scion .
                                 Article 4
 1      Pendirg further coordination enabling branches to bo established
throughout the Community without undergoing any authorization procedure ,
Member States may nalce the commencement of business in their territory
by branches of the credit institutions covered by this ^Directive which
have their head office in another Member State subject to authorization
 according to the law and procedure applicable to credit institutions
 established on their territory
 2-     However , Member States may not refuse authorization to branches of
 credit institutions' on the . sole ground that it is established in cnother
Member State in a legal form which is not allowed in the case of a credit
 institution carrying out analogous activities in the host country..    This
 provision shall not apply, however , to credit institutions formed by one
natural person .
 ?>,    The competent authorities shall inform the Commission of their
 response to applications for authorization to set up such branches which
 are submitted to them .
 ---pagebreak---                                        23 -
    4*      Tha provisions of this Article shall be without prejudice to the
   rules applied by Member States to branches set up in their territory by
   crodit institutions which have their head office there. Notwithstanding
   the provisions of tho third indent' of Article 1 , second sentence , the law
   of Menber States by which a cep^xato authorization is recruired for each
   branch opened by a credit institution in thoir territory sh~.ll apply
   equally to the branches of credit institutions whose head office is in
   snot her Metiber State .
                                   Article 5
           Credit institutions to which this Directive applies may, notwith­
   standing any provisions concerning' the use of the words "bank", " savings
   bank" or other similar descriptions which m     exist in the ho^t country,
   use throughout the territory of the Conmurity the s«une name as they use
   in the country whore their head office is situated.      In the event of there
   being any danger of confusion, the competent authorities of the host
   I'embar States may for purposes of clarifioation require the addition to
   the n:jne of a short explicative phrase .
                                   Article 6
   %       Pending more intensive coordination , the competent authorities
   shall , for purposes of observation and in addition to any eventual ratios
, which may be established by them , ascertain the following, ratios with a
   view to ex=imining the financial soundness of institutions to which this
   Directive applies :
                               >
   a ) the ratio of own funds to deposits ;
   b ) the ratio of own funds to total assets; however , the competent autho­
       rities may exclude certain classes of assets which do not c.crry any
       risk, such as claims on or guaranteed by a Member State ;
   c ) the ratio of own funds to non-liquid assets;
 ' d ) the ratio of current liabilities to licruid assets .
 ---pagebreak---                                   - 24 -
                                                                       t
2,       The ratios specified in paragraph 1 shall be calculated. at least
every three months "by the competent authorities .
2, .     The competent authorities shall examine , in the Committee provided
for in Article 11 , the desirability
a ) of ascertaining, in addition to the ratios specified in paragraph '1 ,
     the ratio of own funds to total open foreign exchange positions , both
     spot and forward on the one hand, and the ratio of own funds to the
     same positions with the different maturities taken into account on the
    other hand;   ,
b ) of extending the ratio specified in para^aph 1 , lit . a., to all or
    part of current liabilities and of prescribing that Member States shall
     ascertain either this ratio or that specified in paragraph 1 , litibj
c ) of completing or replacing1 the ratio specified in par?„grrph 1 , lit', d - ,
    by a ratio of short term current liabilities to liquid assets , and by
     a ratio of all or part of current liabilities to assets invested at
    medium or long term .
4.       After consultation of the Committee provided for in Article 11 ,
the Commission luay alter the list of ratios in paragraph 1 to take account
of structural changes in the field covered by this Directive .
 5.      The competent authorities shall , -.ritliin the Committee provided for
in Article 11 and with a viev: to their coordination, examine the methods
of calculating the ratios specified in paragraph 1 above and, in parti­
cular , the precise definitions to be given to the various constituent
parts ; this examination shall be based on the results of the calculations
obtained for comparable groups of credit institutions ;
 ---pagebreak---                                       - 25 -
                                   ./Article T    .
1.     i 'lith a view t6 supervising those credit institutions which have
set up brandies in one or more Kember States other than that in v.-hich.
their head office is situated the Member States concerned shall colla­
borate closely.     The;'' shall supply one another with all information
likely to facilitate the supervision of such branches ?nd of the credit
institution to which they belong.
2.     The competent authorities of a Member State in whose territory such
a branch is sot up m:y, pendinj a mora intensive coordin-.tion, require
endowment capital to be placed at the disposal of the branch and m?y watch
over the solvency of the latter by means of the ratios specified in
Article 6 t paragraph 1 , lit . a, b and c on the.basis of such capital ?
they shall inform the competent authorities of the country of origin of
the results thereof .
 ---pagebreak---                                     - 26 -
                                  Article 8
 1        The competent authorities shall withdraw the authorization issued
to a credit institution to which this Directive applies 'or to k branch
 authorized under Article 4 where such institution or branoh :
 a ) does not make use of the authorization within six months, expressly
   . renounces the authorization or has ceased to engage in business for
      more than six months ( if the Member State concerned does not provide
      for the authorization to lapse in such cases );
b ) obtained the authorization by deliberately giving false information
      or by other irregular means ;
c ) no longer fulfils the conditions under which authorization was granted,
    . with the exception of those in respect of own funds ;
d ) no longer possesses sufficient own funds or endowment capital , or iio
      no longer has the required solvency or liquidity;
e ) fails fundamentally to fulfil its other obligations under national
      regulations where these expressly contain a measure providing for the
      withdrawal of authorization on this ground .
2.        In addition, the authorization issued to a branch under Article 4
 shall be withdrawn if the competent authority of the country in which
the credit institution which established the branch has its head office
has withdrawn Authorization from that institution.
3         Withdrawal under paragraph 1 , lit . c and d, shall be effected only
if the measures prescribed by the competent authorities for correcting
the situatior.of the institution or the branch do not seem likely to be
successful or are not adopted by the institution or branch.
 ---pagebreak---                                    - 27 -
   '
 4- .  Before withdrawing from a branch an authorization granted under
Article 4t the competent authority of the Member State in which its head
office is situated shall be consulted.      Inhere immediate action is oalled
for , notification may take the place of such consultation.      The same
procedure . shall occur ,, by analogy, in cases of withdrawal of authorization
from an institution which has branches in other Member States .
 ι      »
5-      Reasons must be given for any withdrawal of authorization, which
must be notified to the parties concerned and to the Commission .
 ---pagebreak---                                     28 *"
                                TITLE III
          BRANCHES OF INSTITUTIONS HAVING THEIR HEAD OFFICE OUTSIIE
                              THE COMMUNITY
                                Article 9
1.      • Ponding more intensive coordination of the laws,, regulations and
administrative provisions relating to tranches of credit . institutions
having their head office outside the Community, Member States shall not
apply to such "branches , in respect of the commencement or carrying on of
their business , provisions which result in more favourable treatment than
that accorded to branches of credit institutions of Member States . .
2. • •    The competent authorities shall inform the Committee provided for "
in Article 11 of nil applications for the authorization of branches sub­
mitted to them by credit institutions having their head office outside
the Community. ,
3 .-   . The Community may, through agreements concluded in accordance
with the Treaty with one or more third countries, agree to apply ,
provisions which , having regard to the principle of reciprocity, accord
to branches of an institution having its head . office outside tha Com­
munity identical treatment throughout the Community.
 ---pagebreak---                                       - 29 -
                                     TITLE IV
                     GEMER IL AND TRiìITSITIOITAL PROVISIOFS ,= '
                                 • *    • • .
                                              • ». ».
                                   Article 10
 »                                               Λ
1.       Credit institutions to which this Directive applies which lawfully
commenced, "business "before the entry into force of. the provisions of this
Directive shall "be deemed to "be authorized. They must satisfy the-
condition! laid down in the second indent of Article 3» paragraph 2 , and
shall "be subject to the provisions of this Directive- concerning the
carrying on of business by >credit institutions .-, They shall be included
in the list provided for . in Article 3» paragraph 6 .                ■;
2. ;     Branches , which before the entry into force of this Directive were
lawfully Set up in a Member State which requires such branches .to be
authorized by a credit institution subject to this Directive , shall, be
deemed to be authorized and shall be subject to this Directive .
3.   ' • If an institution or a branch deemed to be authorized under para­
graphs 1 or 2 has not undergone any authorization procedure prior to
commencing business, a prohibition on the caryying on of their business
shall take the place of withdrawal of authorization -        Article 8 sh?.ll in
such circumstances apply by analogy.
 ---pagebreak--- 1.        There shall be set up alongside the Commission a Contact Committee
having the following tasks s
a ) of facilitating, without prejudice to the provisions of Articles 169 and
     170 of the Treaty, a uniform application of the Directives adopted "by the
     Council with regard to credit institutions , by regular consideration of
     the concrete problems involved in their application:
b ) of facilitating a common attitude among competent authorities concerning
     the setting up of credit institutions azid their operations ; this concer-
   ' tation shall cover in particular :
     - decisions of Member States about deferring the application of this
       Directive ;                                             v
     - conditions of authorization for new credit institutions or for branches
       of credit institutions based in another Member State or outside the
       Community;                   '
     - ratios of certain itoms of balance sheets set out in Article 6 ;
     - withdrawal of authorizations ;
     - notifications to the Commission of changes in national lews affecting
       the sector covered by this Directive ;                      ■
c ) of assisting the Commission in the preparation of new proposals to the
     Council concerning further coordination, of advising on the evolution
     and structure of the banking sector;
                                                    »  •        -   .
d ) of putting into effect the cooperation provided for in Article 7 of the
     Directive 73/ I 03/EEC of 28 June 1973 .
 ---pagebreak--- 2.    The Contact Committee shall "be composed of a maximum of two representa­
tives of the supervisory authorities of each Member State , together with two
representatives of the Commission.     These representatives may "be accompanied,
from time to time and by prior agreement of the Committee by one or more
advisers .  The secretariat will be provided by the Commission .
3.    The first meeting of the Committee shall be convened by the Commission
under the Chairmanship of one of its representatives .    At that meeting, the
Committee shall adopt its Rules of Procedure , which will also include pro­
visions concerning its links with the European Monetary Cooperation Fund ,
and shall also elect its Chairman and Deputy-Chairman .
4.    The offices of president and vice-president shall be filled in rotation ,
for one year at a time , by members representing the competent authorities of
one and the same Member State .
5.    Meetings of the Committee shall be convoked by its president , either
on his own initiative or at the request of one of its members .
6.    All the Committee 's discussions shall be subject to the obligation of
professional secrecy , as specified in Article 12 , paragraphs 1 and 2 ,  The
content of such discussion may not be made public in any way save with the
express consent of the Committee .
                                  Article 12
1.    Member States shall ensure that all persons employed by the competent
authorities axe bound by the obligation of professional secrecy .    This obliga­
tion of secrecy shall imply that no information received by them in the course
of their duties may be disclosed except by virtue of provisions laid down by
lav/.   It shall also imply an absence of any obligation to communicate such
information to other authorities .
2.    Paragraph 1 shall also apply to the representatives of the Commission on
the Committee provided for in Article 11 .
3.    The provisions of paragraph 1 shall not however preclude , as provided
in this Directive , the communication of information between the competent
authorities of the various Member States ,   Persons employed by competent
authorities reoeiving such information shall be subject to the obligation of
professional secrecy in respect thereof . They may only divulge such informa­
tion on the express authorization in writing of the competent authority which
communicated the information .
 ---pagebreak---                               Article 13
         Member States shall provide that decisions taken in respect of a
  credit institution in pursuance of laws, regulations or administrative
; provisions adopted in accordance with this Directive may be subject to
  appeal to the courts . The same shall apply where no decision is taken
  within six months of its submission in respect of an application for
  authorization which contains all the information required tinder the
  provisions currently in force .   ...
 ---pagebreak---                                TITLE V
                           FINAL PROVISIONS
                             Article 14
1.     Within eighteen months of the publication provided for in Article 2 ,
paragraph 4> and in any case within twenty-four months of the notification
of this Directive , the Member States shall take the measures necessriry to
implement it .  They shall notify the Commission of these measures without
delay.
2.     Once this Directive has been notified, the Member States shall ,
in sufficient time to enable it to give its views thereon, inform the
Commission of all laws , regulations or administrative provisions which
they propose to adopt in the field governed by this Directive .
3.     This Directive is addressed to the Member States .