CELEX: 51991PC0284
Language: en
Date: 1991-07-26
Title: PROPOSAL FOR A COUNCIL DIRECTIVE IMPLEMENTING DIRECTIVE 89/299/EEC ON THE OWN FUNDS OF CREDIT INSTITUTIONS

COMMISSION OF THE EUROPEAN COMMUNITIES
                                     C0M(91) 284          final
                                     B r u s s e l s , 26 July 1991
                        Proposal f o r a
                      ÇQUNQL DIRECTIVE
        implementing  Directive     89/299/EEC             on   the
            Own Funds o f  credit       institutions
                (presented by the Commission)
 ---pagebreak---  ---pagebreak---                                                   I-
                                EXPLANATORY MEMORANDUM
I • General
1.    On     17   April         1989     the     Council        adopted       the    Own     Funds
      Directive          (89/299/EEC)            and   established            the    definition
      of     the   own      funds      of    credit     institutions             including       the
      way     by w h i c h     total     own   funds are         to be c a l c u l a t e d .   With
      regard       to    the      "Fund     for    General        Banking       Risks"      (FGBR)
      t h e r e w a s no final           allocation. Article              6(2)      states:
      "The      item     referred         to   in A r t i c l e   2(1)(4)        [which     is   the
      FGBR]          shall           constitute            a        separate           category.
      Provisionally,                it     shall      be      included         in    own      funds
      without        l i m i t , but     shall     not   be     included       when    the   basis
      of     the   limit        for   the     items    referred        to    in p o i n t s  3   and
      5       to     8       is     fixed.         Within         six     months         of      the
       implementation             of    this     Directive        the    Commission         shall,
       in      accordance           with      the     procedure          provided          for    in
      Article        8,      propose       the    final      treatment          for    this     item
      either         in     original         own     funds       or    in    additional          own
       funds."
2.    There      are several            reasons      arguing        in f a v o u r  of   deciding
       the     final      allocation          of   the    "Fund       for   General        Banking
       Risks" :
 ---pagebreak---                                        -?-
        the B a s l e C o m m i t t e e    on B a n k i n g  Regulations           decided
        at  its m e e t i n g    of     13 D e c e m b e r   1990    to     include      the
        FGBR   as    "Tier      One     Capital"         and    this     decision        has
        been   endorsed          by     the     Committee         of    Central         Bank
        Governors       of     the      G-10      countries.          Therefore          the
        "discussions         in     international            fora"     have       produced
        the   expected       result         and    a   Community         decision        can
        be  taken     having       regard       and     in c o n f o r m i t y   with    the
        recommended           treatment             of       such         amounts         at
        international           level.       The     Commission           participated
        fully     in    these        discussions            and    is      in     complete
        agreement        with         the      conclusions;              the       Banking
        Advisory      Committee          has also conveyed              its     unanimous
        approvaI ;
        Member     States      are      at    present        transposing           the   Own
        Funds   Directive          into      national        legislation           and   the
        banking      community           is   becoming         familiar         with     the
        new   rules.      Therefore           it    is    expedient          to   reach    a
        final    solution         as     early     as     possible         in   order     to
        give    the      right         and     definitive           information           to
        marketplayers;
        the   calculation          of     the    Solvency        Ratio       as   well    as
        other   prudential          yardsticks           (participations,              large
        exposures) should             be d o n e on an as s t a b l e            basis    as
        possible       and      changes         should        be    kept        to    those
        really    necessary,           etc.
For    ail   these     reasons        the     FGBR     is    included         within     the
category      of     "original           own     funds"        together         with     the
other     two  elements         "capital"          and      "disclosed          reserves"
("core      capital").            The       FGBR       should        henceforth           be
included       when       the        basis        of       the     limit         for     the
"additional        own    funds"          is   fixed       according         to    Article
6 ( 1 ) of  the O w n   Funds        Directive.
 ---pagebreak---                                                -h-
        Although          the   Commission           has    proposed,          by   way      of    a
        Directive           amending          the     Own        Funds       Directive           the
        introduction          of   the    "Comltology         Procedure"         in A r t i c l e  8
        of     the     said    Directive          it  is,     for      reason     given     under
        point        2,  expedient       to    come    to    the      final    allocation         of
        the      FGBR     and   not     to    hold    up    that       decision     until        the
        proposed          amending        Directive         has        been    adopted.          The
        Parliament         will    be   fully       informed       on    this   matter.
 I I . Examination          of   the    articles
Art icle      1.1.
This    article         definitively          includes        in     article     6(1)    of      the
Own    Funds        Directive       the     "Fund     for     General        Banking      Risks"
together        with     the   other     two     elements,        capital      and   disclosed
reserves, within             the c a t e g o r y   of o r i g i n a l   own   funds.
Art icle      1.2
This     article         deletes     article         6(2)     of      the   Directive        as    a
result     of     article     1.1   before        commented.
Art icle      2
This     article         asks     the    Member        States         first     to   take       the
measures        necessary       to    comply       with    the     Directive       before       the
1st   January         1993,    second      to    make    express         reference     to     this
Directive         in the p r o v i s i o n s   adopted      and      third    to   communicate
such   provisions          to the      Commission.
Art içle 3
This   article         makes    the    general       reference          that   the   Directive
is a d d r e s s e d   to the M e m b e r    States.
 ---pagebreak---                                  -b -
                               Proposal for
                        a Counc il D i rectIve
             implementing Directive 89/299/EEC on the
                 Own Funds of credit institutions
THE COUNCIL OF THE EUROPEAN COMMUNITIES
Having regard to the Council Directive 89/299/EEC of
17 April 1989 on the own funds of credit institutions^1^
and in particular Articles 6(2) and 8 thereof;
Having regard to the proposal from the Commission;
Whereas on 17 April 1989 the Council adopted the Own Funds
Directive (89/299/EEC) and established the definition of the
own funds of credit institutions including the way by which
total own funds are to be calculated;
Whereas, with regard to the Fund for General Banking Risk in
the   sense of    Article   38 of      the Council   Directive
(86/635/EEC) of 8 December 1986 on the annual accounts of
other   financial   institutions^2^     there  was  no   final
allocation, it states in Article 6(2) of the above mentioned
Directive   that   within   six    months   of  the  date of
implementation the Commission shall propose the final
treatment of the Fund for General Banking Risk either in
original own funds or in additional own funds, in accordance
with the procedure provided for in Article 8;
Whereas having regard to the opinion of the Banking Advisory
Committee and taking into account the results of discussions
in international fora and in conformity with th- treatment
of the Fund for General Banking risks at international
level, these are included within the category of original
own funds.
HAS ADOPTED THIS DIRECTIVE:
(1) OJ No L 124, 5.5.1989, p. 16
(2) OJ No L 372, 31.12.1989, p. 1
 ---pagebreak---                                     •6-
                              Artlçlo 1
1. Article  6(1) of    Directive      89/299/EEC      is hereby      replaced
   by the foI low i ng:
   "1.  The  items referred        to  in Article     2 ( 1 ) , points 3 and
        5 to 8 shall     be subject      to the following          limits:
        (a)   the total     of   items 3 and 5 to 8 may not             exceed
              a   maximum    of     100%   of   items     1   plus   2  and  4
              m i nus 9,   10 and     11 ;
        (b)   the   total    of    items   7  and   8 may      not  exceed   a
              maximum    of   5 0 % of   items   1 plus       2 and   4  minus
              9, 10 and     11 ;
        (c)   the total     of   items 12 and      13 shall      be  deducted
              from   the total      of the    items.
2. Article 6(2) of Directive 89/299/EEC              is deleted
 ---pagebreak---                                             ¥-
                                     Article. 2
1.  Member     States       shall         bring      into      force       the    laws,
    regulations      and    administrative            provisions        necessary     to
    comply    with    this      Directive         not    later      than    1   January
    1993.
2.  When    Member    States         adopt     these     measures,         they   shall
    contain     a   reference           to   this     Directive         or   shall    be
    accompanied      by  such       reference       on   the   occasion       of  their
    official      publication.           The    methods      of      making     such   a
    reference     shall   be     laid down       by   the M e m b e r   States.
3.  Member    States    shall        communicate        to   the      Commission     the
    text   of  provisions        of     national      law   which      they   adopt   in
    the   field   governed      by     this   Directive.
                                     ArtlsH 3
This Directive     is a d d r e s s e d   to the M e m b e r   States
 ---pagebreak---                               - # > -
                      FINANCIAL STATEMENT
This proposal  will not entail    any cost to the budget of the
European  Communities
 ---pagebreak---                                               -9-
                     IMPACT ON C O M P E T I T I V E N E S S AND E M P L O Y M E N T
i• what is the main Just ificatIon for the measure?
T h e r e are two r e a s o n s to implement                 the O w n F u n d s     Directive
at this s t a g e :
(a)       according to this Directive within six months of its
          date of implementation, the Commission shall propose
          the final treatment of the "Fund for General Banking
          R isks" ;
(b)       the treatment of the "Fund for General Banking Risks"
          at international level permits its final allocation
          according to the criteria adopted in international
          fora .
• I• Characteristics of the enterprises concerned
The enterprises concerned under this Directive                                        are   all
credit institutions autorized in the Community.
 M l . What            are    the     obi Igat tons            Imposed         directly      pji
          e n t e r p r ise§?
A c c o r d i n g to the p r o p o s a l , Member S t a t e s           may include the
"Fund for General B a n k i n g R i s k s " w i t h i n                 the c a t e g o r y of
original o w n funds of credit i n s t i t u t i o n s .
 ---pagebreak---                                                 -10-
IV.       What o b l i g a t i o n s are likely to be imposed                  indirectly on
          e n t e r p r i s e s through   local     authorities?
None
V.        Are there            special   measures      for SMEs?            Li SJSL, Qf   what
          kind?
None
VI .      What       is the anticipated effect o n :
          (a) the c o m p e t i t i v e n e s s of e n t e r p r i s e s ?
          (b) employment?
(a)       By granting the same definition pertaining                            the original
          own      funds       it   is ensured     that    credit          institutions can
          engage           in   direct    competition          in      a    common    banking
          market.
(b)       An      adequate         treatment      of   the     own        funds    of   credit
          institutions             serves      to   ensure        the       continuity     and
          therefore to protect savings and e m p l o y m e n t .
V I I . Have the social Partners been c o n s u l t e d ? What are their
          views?
NO.      The measure             proposed     has no    impact         on    the   industrial
r e l a t i o n s h i p s and the level of employment.
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                                                              COM(91) 284 final
                                                      DOCUMENTS
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                                                             ISBN 92-77-74889-3
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