CELEX: 51991PC0491
Language: en
Date: 1991-12-02
Title: Amended proposal for a COUNCIL DIRECTIVE RELATING TO THE SUPERVISION OF CREDIT INSTITUTIONS ON A CONSOLIDATED BASIS

H COMMISSION OF THE EUROPEAN COMMUNITIES
                                      COM(91) 491 final - SYN 506
                                      Brussels, 2 December 1991
                       Amended proposal for a
                          COUNCIL DIRECTIVE
       RELATING TO THE SUPERVISION OF CREDIT INSTITUTIONS
                     ON A CONSOLIDATED BASIS
      (presented by the Commission pursuant to Article 149(3
                         of the EEC-Treaty)
 ---pagebreak---                                           - 1 -
                               EXPLANATORY MEMORANDUM
1.  On   9 October 1990      the    Commission      transmitted      to   the   Council    a
proposal    for   a   Directive      relating     to    the    supervision      of   credit
institutions on a consolidated basis.1               The main aim of that proposal
is  to  reinforce     supervision      of   credit     institutions      belonging     to a
group,   particularly      by    extending      the   scope     of   supervision      on   a
consolidated basis to banking groups whose parent undertaking is not a
credit institution.
2.  The    Economic    and    Social     Committee       delivered      its   opinion     on
                    2
27 February 1991.       Parliament      has    carried     out   a   first   reading     and
delivered an opinion on 20 November 1991 on the basis of a report drawn
up  by   the    Committee     on   Legal     Affairs     and    Citizens'      Rights.    In
accordance with Article 149(3) of the Treaty and                   in the light of the
two opinions delivered, the Commission is presenting an amended version
of its propsoal for a Directive.
3.  The   Commission     has    incorporated      into    its proposal      a    number   of
amendments     proposed     by    Parliament      and     the    Economic     and    Social
Committee.    A   number    of    other    amendments      designed     to    improve    and
clarify certain provisions are also proposed.
The main amendments are commented on below.
1  COM(90) 451; OJ No C 315, 14.12.1990
2  OJ No C 102, 18.4.1991, p. 19.
 ---pagebreak---                                         -  2• -
Recitals
Two new recitals, the fifth and the twelfth^ have been added                   in the
light of amendments proposed by Parliament.
Art icle 3:      Supervision of       credit    institutions     on   a  consolidated
                 basis
Paragraph 3
Given the progress made in discussions in the Council and Parliament on
the proposal for a Council Directive on capital adequacy of investment
firms and credit     institutions,1 the Commission no longer considers it
necessary    to retain   the   fourth     indent   which  gave Member States       the
option of excluding from consolidation financial             institutions that are
principally    subject   to market      risks.    Pending    the   adoption   of   the
above-mentioned Directive, the consolidation of such institutions will
be carried out according        to the methods determined          by Member States
(see comments below on the new paragraph 2 of Article 9 ) .
Paragraph 4
A new   first   subparagraph    has been      incorporated    in the     light of an
amendment proposed by Parliament.
Paragraph 5
Supervision of capital      adequacy    in relation to market        risks has been
added   to  the   list  of   subjects     to be    covered   by   supervision    on a
consolidated basis.
A  third   subparagraph    has   been   added    in the    light   of   an  amendment
proposed by Parliament.
1  COM(90) 141; OJ No C 152, 21.6.1990.
 ---pagebreak---                                      - 3 -
Paragraph 7
Provision has been made, subject to observance of strict conditions,
for a further option for forgoing supervision on an individual basis,
namely where a credit       institution  is the subsidiary of        a financial
holding company with its head office in the same Member State.
A new second subparagraph sets out, by analogy with the provisions of
Article 3(4)    of   Directive 89/647/EEC    on    the   solvency    ratio,   the
conditions governing the exemption arrangements.
Paragraph 10
This   new  paragraph   authorizes   the competent     authorities    to  request
information    from   the    non-consolidated    subsidiaries     of    a  credit
institution or financial holding company.
Art icle 4:      Competent      authorities     charged      with      exercising
                 supervision on a consolidated basis
Paragraph 5
This paragraph has been inserted in order to ensure cooperation between
competent    authorities   where,   in  the  Member States,     more    than  one
authority   is responsible for the prudential supervision of credit and
financial institutions.
 ---pagebreak---                                      - 4 ~
Art icle 5:      Form and extent of consolidation
Paragraph 3
Paragraph 3 has been redrafted so as to cover only cases where there is
a participation or other capital link.
In the light of an amendment proposed by Parliament, a few words have
been added to specify the conditions under which the equity method may
be used.
Paragraph 4
This new paragraph sets out, on an optional basis, other cases that may
give   rise to supervision     on a consolidated    basis.   It covers   cases
where there is no participation or other capital link.
Art icle 9:      Final provisions
Paragraph 2
This    new  paragraph     stipulates    that,  pending    adoption   of   the
above-mentioned     Directive    on    capital   adequacy,    the    competent
authorities   will   determine   the methods   for  consolidating    financial
institutions which are exposed mainly to market risks, and this by way
of  derogation   from   the rules   laid down   in Article 3(5)    (see  above
comments on Article 3(3)).
 ---pagebreak---                                          -5"-
                               Amended proposal for a
                                  COUNCIL DIRECTIVE
                     relating to the supervision of credit
                      institutions on a consolidated basis
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having    regard    to    the   Treaty    establishing   the     European      Economic
Community, and     in particular Article 57(2), first and third sentences
thereof,
Having regard to the proposal from the Commission^1),
In co-operation with the European Par Iiament^2),
Having regard to the Opinion of the Economic and Social Committee<3),
Whereas Council Directive 83/350/EEC of 13 June 1983 on the supervision
of   credit   institutions      on  a  consolidated    basis ( 4 )  established     the
necessary    framework     for   the   introduction   of  supervision       of   credit
institutions      on    a    consolidated     basis;    whereas       following     the
transposition of that Directive           into the national       law of the Member
States   the principle of supervision on a consolidated basis                    is now
applied throughout the Community;
Whereas, in order to be effective, supervision on a consolidated basis
must   be applied     to all     banking   groups,  including      those   the parent
undertakings     of   which     are   not   credit   institutions;       whereas    the
competent authorities must have sufficient           legal powers to be able to
exercise such supervision;
(1)    OJ C 315 of    14.12.1990, p. 15.
(2)    Decision of    20 November 1991 (not yet published in the Official
       Journal).
(3)    OJ C 102 of    18.4.1991, p. 19.
(4)    OJ L 193 Of    18.7.1983, p. 18.
 ---pagebreak---                                      -    6-
Whereas, in the case of groups with diversified activities the parent
undertakings    of   which   control    at     least  one    credit    institution
subsidiary,   the   competent   authorities must       be   able  to   assess   the
financial situation of a credit institution in such a group; whereas,
pending   subsequent   co-ordination,     the    Member   States   may   lay   down
appropriate   methods    of  consolidation       for  the   achievement    of   the
objective of this Directive; whereas the competent authorities must at
least have the means of obtaining from all undertakings within a group
the   information   necessary   for   the    performance    of   their   function;
whereas   co-operation    between   the    authorities     responsible    for   the
supervision   of   different   financial     sectors must     be  established    to
ensure   the effective supervision of groups carrying on a range of
financial activities;
Whereas rules limiting the risks taken by a credit institution on the
mixed-activity company of which it is a subsidiary, as well as those
taken on the other subsidiaries of the same mixed-activity company can
be   particularly   useful;   whereas    it would,      however,   appear    to  be
preferable to settle this question in a more systematic manner               in the
framework of a future Directive on the limitation of large exposures;
Whereas risks taken by one or more credit institutions are revealed not
only   in figures shown     in (consolidated) balance         sheets and     annual
accounts but are also subject to the manner in which relations within
groups are organized and the relative independence of the management of
the credit institutions involved;
Whereas the Member States can, furthermore, refuse or withdraw banking
authorization    in  the   case  of  certain      group   structures    considered
inappropriate for carrying on banking activities, in particular because
such structures could not be supervised effectively; whereas In this
 ---pagebreak---                                        -¥-
respect   the  competent      authorities      have   the   powers    mentioned   in
Article 8(1)(c)     of     the    first     Council     Directive 77/780/EEC      of
17 December 1977     on    the   co-ordination      of    laws,    regulations   and
administrative provisions relating to the taking up and pursuit of the
business of credit      inst i tut ions*1 *, and    in Articles 5 and 11 of the
second  Council   Directive 89/646/EEC        of  15 December 1989 on       the  co-
ordination of laws, regulations and administrative provisions relating
to the taking up and pursuit of the business of credit institutions and
amending  Directive 77/780/EEC*2^,         in order    to ensure     the sound   and
prudent management of credit institutions;
Whereas  the Member     States can equally apply         appropriate    supervision
techniques to groups with structures not covered by this Directive;
whereas  if such     structures    become    common   this    Directive   should  be
extended to cover them-,
Whereas supervision on a consolidated basis must take in all activities
defined in the Annex to Directive 89/646/EEC; whereas all undertakings
principally engaged     in such activities must therefore be included in
supervision   on   a   consolidated     basis;    whereas      in  consequence   the
definition of financial      institution given in Directive 83/350/EEC must
be widened to cover such activities;
Whereas regarding the consolidation of financial             institutions involved
in  activities   principally     subject     to market     risks   and  subject   to
particular rules of supervision, the co-ordination of the methods for
the  consolidated     supervision    of   market    risks    is   possible   in  the
framework of Community harmonization of capital adequacy of investment
(1)   OJ L 322 of 17.12.1977, p. 30.
(2)   OJ L 386 of 30.12.1989, p. 1.
 ---pagebreak---                                         -rf-
firms and credit      institutions, for which the Commission has introduced
a    proposal     for    a    Directive     (COM(90)      141)*1>;    whereas     such
harmonization concerns inter alia the conditions which must be applied
when offsetting opposing positions            in the group, and the case where
these financial     institutions are subject to specific supervisory rules
regarding their financial stability; whereas this implies that, pending
entry   into force of the Directive on capital adequacy to cover market
risks,    the    competent     authorities     shall    include    in    consolidated
supervision     financial    institutions which      are principally       exposed  to
market risks in accordance with methods determined by those authorities
in the light of the particular nature of the risks involved;
Whereas,    following    the adoption     of   Council    Directive   86/635/EEC of
8 December 1986 on the annual          accounts and consolidated          accounts of
banks and other financial        institut ions* 2 ), which establishes the rules
applicable to consolidated accounts published by credit                 institutions,
together     with   the   provisions    of    Council    Directive    83/349/EEC    of
13 June 1983 on consolidated accounts*3^it             is now possible to define
more   precisely     the   methods   to   be    used   in   prudential    supervision
exercised on a consolidated basis;
Whereas this Directive is fully in keeping with the objectives defined
in the Single European Act; whereas it will               in particular ensure the
homogeneous application        throughout    the Community     of prudential     rules
established by other Community        legislation,      which must be observed on
a   consolidated     basis;    whereas   this     Directive    is,   in    particular,
necessary for the correct application of Council Directive 89/299/EEC
of 17 April 1989 on the own funds of credit institut ions*4*;
(1)    OJ  C  152 of  21.6.1990, p. 6.
(2)    OJ  L  372 of  31.12.1986, p. 1.
(3)    OJ  L  193 of  18.7.1983, p. 1.
(4)    OJ  L  124 of  5. 5.1989, p. 16.
 ---pagebreak---                                  -f-
Whereas supervision of credit institutions on a consolidated basis must
be aimed at protection of the depositors of the credit institutions;
Whereas it is desirable that agreement should be reached, on the basis
of reciprocity, between the Community and third countries with a view
to allowing the practical exercise of consolidated supervision over the
largest possible geographical area;
Whereas  the  amendments  to be made   to Directive 83/350/EEC  are  so
considerable that it is preferable that it be wholly replaced by this
Directive,
HAS ADOPTED THIS DIRECTIVE:
 ---pagebreak---                                       -4?-
                                   Article 1
                                  Definitions
For the purposes of this Directive:
    "credit   institution" shall mean a credit       institution within     the
    meaning    of    the  first     indent   of Article     1  of    Directive
    77/780/EEC, or any private or public undertaking which corresponds
    to   the   definition     in   the   first  indent   of   Article    1   of
    Directive 77/780/EEC and has been authorized in a third country;
    "financial    institution"   shall   mean an undertaking    other   than a
    credit   institution, the principal activity of which is to acquire
    holdings or to carry on one or more of the activities            listed in
    points 2 to 12 of the Annex to Directive 89/646/EEC;
    "financial holding company" shall mean a financial institution the
    subsidiary    undertakings of which are either exclusively or mainly
    credit institut ions or financial institutions, one at least of such
    subsidiaries being a credit institution;
    "mixed-activity holding company" shall mean a parent undertaking,
    other than a financial holding company or a credit institution, the
    subsidiaries of which include at least one credit institution;
    "ancillary banking services undertaking" shall mean an undertaking
    the principal     activity of which consists     In owning or     managing
    property, managingdata-processing services, or any other           similar
    activity which     is ancillary to the principal     activity of one or
    more credit institutions;
 ---pagebreak---                                  -//-
"participation" shall mean the ownership, direct or           indirect, of
20% or more of the voting rights or capital of an undertaking;
"parent undertaking" shall mean a parent undertaking within the
meaning of Article 1(1) of Council Directive 83/349/EEC and any
undertaking which,    in the opinion of the competent         authorities,
effectively     exercises    a    dominant     influence    over    another
undertaking;
"subsidiary" shall mean a subsidiary undertaking within the meaning
of Article 1(1) of Directive 83/349/EEC and any undertaking over
which,   in  the opinion    of   the   competent  authorities,    a  parent
undertaking    effectively    exercises    a   dominant    influence;   all
subsidiaries of subsidiary undertakings shall also be considered
subsidiaries of the undertaking that is their ultimate parent;
"competent authorities" shall mean the national authorities which
are   empowered    by   law    or    regulation   to    supervise    credit
institutions;
 ---pagebreak---                                   - « -
                               Article g
                                  Scope
This Directive shall apply to credit institutions that have obtained
the authorization referred to    in Article 3 of Directive 77/780/EEC,
financial holding companies and mixed-activity holding companies which
have their head offices in the Community.
The  institutions  permanently  excluded  by  Article 2  of  Directive
77/780/EEC, with the exception of the Member States' central banks,
shall be treated as financial   institutions for the purposes of this
Directive.
 ---pagebreak---                                         _ ^ -
                                     Article 3
      Supervision on a consolidated basis of credit                  institutions
1. Every    credit    institution     which     has    a    credit    institution    or   a
   financial      institution      as    a     subsidiary        or    which    holds     a
   participation in such institutions shall be subject, to the extent
   and   in the manner     prescribed      in Article 5, to supervision on the
   basis of     its consolidated       financial      situation.       Such   supervision
   shall    be   exercised     at    least      in    the     areas    referred    to    in
   paragraphs 5 and 6.
2. Every   credit     institution    the    parent      undertaking      of  which    is a
   financial    holding company      shall    be subject, to the extent            and   in
   the manner prescribed       in Article 5, to supervision on the basis of
   the   consolidated     financial     situation        of   that   financial    holding
   company.    Such supervision shall be exercised at least in the areas
   referred    to    in  paragraphs 5       and    6.     The   consolidation     of    the
   financial situation of the financial holding company shall not                        in
   any way imply that the competent authorities are required to play a
   supervisory     role   in   relation      to   the     financial     holding   company
   standing alone.
3. The  Member    States    or  the    competent      authorities       responsible     for
   exercising     supervision      on    a    consolidated         basis    pursuant     to
   Article 4 may decide in individual cases that a credit                    institution,
   financial     institution    or   auxiliary      banking      services     undertaking
   which   is a subsidiary or in which a participation is held need not
   be included in the consolidation:
   - if the undertaking that should be included is situated                    in a third
     country where there are legal            impediments to the transfer of the
     necessary     information;
 ---pagebreak---                                         -4M-
           if,    in    the   opinion     of   the    competent     authorities,        the
          undertaking        that    should     be    included     is   of    negligible
           interest only with respect to the objectives of monitoring
          credit      institutions and       in all cases      if the balance sheet
           total of the undertaking            that should be        included     is less
           than      the     smaller      of     the     following       two     amounts:
           ECU 10 million       or   1% of     the   balance    sheet     total    of   the
          parent      undertaking      or    the    undertaking      that     holds     the
          participation;        if two or more undertakings meet               the above
          criteria,       they     must    nevertheless       be    included      in    the
          consolidation where collectively they are of non-negligible
           interest with respect to the aforementioned objective;
           if, in the opinion of the competent authorities responsible
           for   exercising      supervision      on   a   consolidated      basis,     the
          consolidation of the financial situation of the undertaking
           that should be included would be inappropriate or misleading
           as   far    as   the   objectives      of   the   supervision      of    credit
           institutions are concerned.
4. Where the first       indent of Article 3(1) is applied, the competent
   authorities shall nevertheless obtain any information the transfer
   of which is authorized and inform the Commission of the limits set
   by a specified non-member country.
   When the competent authorities of a Member State do not                      include a
   credit    institution      subsidiary     in supervision       on    a  consolidated
   basis under one of the cases provided for in the second and third
   indents of paragraph 3, the competent                authorities of       the Member
   State in which that credit           institution subsidiary         is situated may
   ask  the parent      undertaking      for   information which may          facilitate
   their supervision of that credit institution.
5. Supervision of solvency, and of the adequacy of own funds to cover
   market   risks and control        of   large exposures, as governed             by the
   relevant    Community       acts   in    force,     shall    be    exercised      on   a
 ---pagebreak---                                    -/y
consolidated basis      in accordance with this Directive. The Member
States shall adopt any measures necessary, where appropriate, to
 include financial holding companies in consolidated supervision, in
accordance with paragraph 2.
Compliance    with   the    limits     set    in   Article 12(1)     and    (2)   of
Directive 89/646/EEC      shall    be   supervised     and    controlled    on   the
basis of the consolidated or sub-consolidated financial situation
of the credit institution.
Supervision on a consolidated basis shall also include all figures
and facts, e.g. the economic and financial performance of the group
the knowledge of which could be Judged as useful with regard to the
quality of supervision on a consolidated basis. This concerns not
only financial     information but also organization of the business,
influence    exercised     by    undertaking      within    a   group    on   other
undertakings and the existence of adequate information flows.
The    competent    authorities       shall     ensure    that,     in    all    the
undertakings     included     in   the   scope    of   the    supervision     on   a
consolidated basis that        is exercised over a credit          institution in
implementation of paragraphs          1 and     2 above,    there are      adequate
internal   control   mechanisms      for   the production of        any   data   and
information which would be relevant for the purposes of supervision
on a consolidated basis.
Without    prejudice    to    specific     provisions     contained      in   other
Directives,    the    Member     States     may    waive   application       on   an
individual   or   subconsolidated       basis    of  the   rules    laid   down   in
paragraph 5 to a credit        institution that, as a parent undertaking,
is subject    to supervision       on   a consolidated       basis, and     to any
subsidiary of such a credit         institution which       is subject to their
authorization and supervision and is included in the supervision on
 ---pagebreak---                                        -46-
    a consolidated basis of the credit institution which is the parent
    company.    The same exemption        option    shall   be allowed where         the
    parent   undertaking     is a financial      holding company which has           its
    head office     in the same Member State as the credit               institution,
    provided    that   it   is subject      to   the   same   supervision      as   that
    exercised over credit institutions, and in particular the standards
    laid down in paragraph 5.
    In both cases, steps must           be taken     to ensure     that    capital    is
    distributed adequately within the banking group.
8.  Where   a   credit    institution     the   parent    of   which    is   a    credit
    institution has been authorized and is situated               in another Member
    State, the competent authorities which granted that authorization
    shall apply the rules laid down in paragraph 5 to that                 institution
    on an individual or, when appropriate, a subconsolIdated basis.
9.  Notwithstanding paragraph 8, the competent authorities responsible
    for authorizing the subsidiary of a parent undertaking which is a
    credit    institution    may,   by   bilateral     agreement,    delegate      their
    responsibility for supervision to the competent authorities which
    authorized and supervise        the parent      undertaking.     The    Commission
    must   be   kept    informed   of    the   existence     and  content      of   such
    agreements.     It   shall    forward     such    information     to    the    other
    authorities and to the Banking Advisory Committee.
10. The Member States shall provide that their competent                   authorities
    responsible for exercising supervision on a consolidated basis may
    ask the subsidiaries of a credit institution or a financial holding
    company which are not included within the scope of supervision on a
    consolidated     basis for    the data and       information    referred      to in
    Article 6.    In such a case, the procedures              for  transmitting and
    verifying the information laid down in that Article shall apply.
 ---pagebreak---                                     - # -
                                  Article 4
      Competent authorities responsible for exercising supervision
                          on a consolidated basis
1. Where a parent undertaking is a credit institution, supervision on
    a   consolidated    basis   shall   be   exercised    by   the   competent
    authorities      that     authorized      it    under     Article 3     of
    Directive 77/780/EEC.
2. Where the parent of a credit        institution   is a financial    holding
    company, supervision on a consolidated basis shall be exercised by
    the competent authorities which authorized that credit         institution
   under Article 3 of Directive 77/780/EEC.
    However, where credit institutions authorized in two or more Member
    States have as their parent       the same financial     holding  company,
    supervision  on   a consolidated     basis shall   be exercised    by  the
    competent authorities of the credit       institution authorized    in the
   Member State in which the financial holding company was set up.
    If no credit    institution subsidiary has been authorized          in the
   Member State     in which the financial holding company was set up,
    the competent authorities of the Member States concerned (including
    those of the Member State in which the financial holding company
   was set up) shall seek to reach agreement as to who amongst them
   will exercise supervision on a consolidated basis.          In the absence
   of such agreement, supervision on a consolidated basis shall be
   exercised by the competent authorities that authorized the credit
    institution with the greatest balance sheet total; if that figure
    is the same for two or more credit institutions, supervision on a
   consolidated basis shall be exercised by the competent authorities
   of the first credit institution to be authorized under Article 3 of
   Directive 77/780/EEC.
 ---pagebreak---                                 -ff-
3. The competent authorities concerned may by common agreement waive
   the rules   laid down   in the first  and second    subparagraphs of
   paragraph 2.
4. The agreements referred to In the third subparagraph of paragraph 2
   and in paragraph 3 shall provide for procedures for co-operation
   and for the transmission of information such that the objectives of
   this Directive may be achieved.
5. Where Member States have more than one competent authority for the
   prudential   supervision  of  credit   institutions   and   financial
   institutions, Member States shall take the requisite measures to
   organize co-ordination between such authorities.
 ---pagebreak---                                  -49-
                               Article 5
                   Form and extent of consolidation
1. The competent authorities responsible for exercising supervision on
   a consolidated basis must, for the purposes of supervision, require
   full consolidation of all     the credit    institutions and    financial
   Institutions which are subsidiaries of a parent undertaking.
   However, proportional consolidation may be prescribed where, in the
   opinion of the competent    authorities, the      liability of a parent
   undertaking holding a share of the capital is limited to that share
   of the capital because of the liability of other shareholders or
   members whose solvency is satisfactory.      The liability of the other
   shareholders and members must be clearly established, if necessary
   by means of formal, signed commitments.
2. The competent authorities responsible for carrying out supervision
   on  a consolidated   basis must,     in order   to do so, require     the
   proportional consolidation of participations in credit institutions
   and financial  institutions managed by an undertaking        included in
   the  consolidation   together   with   one  or   more  undertakings   not
   included in the consolidation, where those undertakings' liability
   is limited to the share of the capital they hold.
3. In the case of participations or capital         ties other   than those
   referred to in paragraphs 1 and 2, the competent authorities shall
   determine whether and how consolidation is to be carried out. They
   may permit or require use of the equity method where the risk to
 ---pagebreak---                                      -20-
   which   the shareholder     is exposed     is limited to his       investment.
   That   method    shall   not,    however,    constitute    inlusion     of   the
   undertakings concerned in supervision on a consolidated basis.
4. Without prejudice to paragraphs 1 to 3, the competent authorities
   shall determine whether and how consolidation is to be carried out
   in the following cases:
   - where,   In the opinion of the competent            authorities, a credit
      institution exercises a significant         influence over one or more
     credit    institutions    or    financial    institutions,     but    without
     holding    a    participation     or   other    capital    ties    in    these
      institutions;
   - where two or more credit        institutions or financial       institutions
     are placed     under   single management      other   than   pursuant    to a
     contract    or    clauses   of    their   memorandums     or   articles     of
     association;
   - where two or more credit        institutions or financial       institutions
     have administrative, management or supervisory bodies with the
     same persons constituting a majority.
   In particular, the competent authorities may permit or require use
   of the method provided for in Article 12 of Directive 83/349/EEC.
   That   method   shall    not,  however,     constitute    inclusion     of   the
   undertakings concerned in consolidated supervision.
5. Where consolidated supervision is required pursuant to Article 3(1)
   and (2), ancillary banking services undertakings shall be included
   in consolidations In the cases and in accordance with the methods
   laid down in paragraphs 1, 2, 3 and 4 of this Article.
 ---pagebreak---                                    -zV-
                                 Article 6
      information to be supplied by mixed-activity holding companies
                          and their subsidiaries
1. Pending further co-ordination of consolidation methods, the Member
   States shall provide that, where the parent undertaking of one or
   more credit   institutions is a mixed-activity holding company, the
   competent    authorities    responsible   for   the   authorization    and
   supervision of those credit institutions shall, by approaching the
   mixed-activity holding company and its subsidiaries either directly
   or via credit institution subsidiaries, require them to supply any
   data or   information which would be relevant       for the purposes of
   supervising the credit institution subsidiaries.
2. The Member States shall provide that their competent           authorities
   may carry out, or have carried out by external        inspectors, on-the-
   spot   inspections   to   verify  data   received   from   mixed-activity
   holding companies and their subsidiaries.         If the mixed-activity
   holding   company   or  one   of   its  subsidiaries    is  an   insurance
   undertaking or a firm providing investment services, the procedure
   laid down   in Article 7(4) may also be used.        If a mixed-activity
   holding company or one of its subsidiaries is situated in a Member
   State other than that in which the credit institution subsidiary is
   situated, on-the-spot verification of information shall be carried
   out in accordance with the procedure laid down in Article 7 ( 7 ) .
 ---pagebreak---                                     -n-
                                   Article 7
                  Measures to facilitate the application
                              of this Directive
1. The Member    States shall    take the necessary steps to ensure that
   there are no legal impediments preventing the undertakings included
   within   the scope of supervision on a consolidated           basis, mixed-
   activity holding companies and their subsidiaries, or subsidiaries
   of  the   kind   covered   in Article   3(10),   from   exchanging   amongst
   themselves any data and information which would be relevant for the
   purposes of supervision in accordance with this Directive.
2. Where a parent undertaking and any of          its subsidiaries that are
   credit   institutions are situated      in different Member     States, the
   competent   authorities of each Member       State shall     communicate  to
   each other all relevant data and information which may allow or aid
   the exercise of supervision on a consolidated basis.
   Where  the competent     authorities of    the Member    State   in which a
   parent    undertaking     is   situated   do   not    themselves    exercise
   supervision on a consolidated basis pursuant to Article 4, they may
   be invited by the competent authorities responsible for exercising
   such supervision     to ask the parent undertaking        for any data and
   information which would be relevant for the purposes of supervision
   on a consolidated basis and to transmit them to those authorities.
3. The Member States shall permit the exchange between their competent
   authorities of the information referred to in paragraph 2, on the
   understanding     that,  in the case of    financial    holding   companies,
   financial   institutions or ancillary banking services undertakings,
   the collection or possession of        information shall not     in any way
   imply   that   the   competent   authorities   are   required    to  play  a
   supervisory role in relation to those institutions standing alone.
 ---pagebreak---                                      -u-
   Similarly,   the    Member    States   shall   authorize   their    competent
   authorities to exchange the information referred to in Article 6 on
   the understanding that the collection or possession of information
   does not   in any way     imply that the competent authorities play a
   supervisory role in relation to the mixed-activity holding company
   and those of its subsidiaries which are not credit institutions, or
   to subsidiaries of the kind covered in Article 3(10).
4. Where a credit     institution, financial ho IdIng company or a mixed
   activity holding company controls one or more subsidiaries which
   are insurance companies or other undertakings providing investment
   services   which     are   subject    to   authorization,     the   competent
   authorities and the authorities entrusted with the public task of
   supervising   insurance     undertakings    or  those   other    undertakings
   providing   investment    services shall     co-operate   closely.    Without
   prejudice to their respective responsibilities, those authorities
   shall provide one another with any information likely to simplify
   their task and to ensure supervision of the activity and overall
   financial situation of the undertakings they supervise.
5. Information received pursuant to this Directive and in particular
   any exchange of information between competent authorities which is
   provided for in this Directive shall be subject to the obligation
   of    professional        secrecy       defined      in    Article 12       of
   Directive 77/780/EEC.
6. The  competent     authorities     responsible     for  supervision     on   a
   consolidated basis shall establish lists of the financial holding
   companies   referred     to   in  Article 3(2). Those       lists   shall   be
   communicated    to    the   other   competent    authorities    and   to   the
   Commission.
 ---pagebreak---                                -lh~
Where, in applying this Directive, the competent authorities of one
Member  State wish    in specific   cases  to verify   the   information
concerning   a credit   institution, a financial   holding company, a
financial institution, an ancillary banking services undertaking, a
mixed-activity holding company, a subsidiary of the kind covered in
Article 6 or a subsidiary of the kind covered        in Article 3(10),
situated   in another   Member  State, they must    ask  the   competent
authorities of that other Member State to have that verification
carried out.    The authorities which have received such a request
must, within the framework of their competence, act upon it either
by  carrying   out  the   verification  themselves,   by  allowing   the
authorities who made the request to carry it out, or by allowing an
auditor or expert to carry it out.
Without  prejudice to the provisions of criminal       law, the Member
States shall ensure     that penalties or measures aimed at       ending
observed breaches or the causes of such breaches may be imposed on
financial holding companies and mixed-activity holding companies,
or  their effective managers, that     infringe  laws, regulations or
administrative provisions enacted to implement this Directive.        In
certain cases such measures may require the       intervention of the
courts.  The   competent   authorities  shall  co-operate   closely   to
ensure that the abovementioned penalties or measures produce the
desired results, especially when the central administration or main
establishment of a financial holding company or of a mixed-activity
holding company is not located at its head office.
 ---pagebreak---                                      -is-
                                   Article 8
                                Third countries
1. The Commission may submit proposals to the Council, either at the
   request   of   a   Member   State  or   on    its  own   initiative,    for   the
   negotiation of agreements with one or more third countries with the
   aim   of   establishing      means    of    exercising     supervision     on   a
   consolidated basis over:
   - credit   institutions with parent undertakings            in third   countries
     and
   - credit    institutions     situated     in   third   countries    the   parent
     undertakings of which, whether credit            institutions or     financial
     holding companies, have their head offices in the Community.
2. The agreements referred to in paragraph 1 shall             in particular seek
   to ensure both:
   -   that the competent authorities of the Member States are able to
     obtain   the    information   necessary     for  the   supervision,    on   the
     basis   of    their   consolidated     financial    situations,    of   credit
     institutions      or  financial   holding     companies     situated   in   the
     Community    and which have as subsidiaries credit            institutions or
     financial    institutions situated outside the Community, or which
     hold participations in such institutions;
   - that   the competent     authorities of      third   countries   are able    to
     obtain   the   information necessary       for the supervision of       parent
     undertakings the head offices of which are situated within their
     territories and which have as subsidiaries credit             institutions or
     financial    institutions situated      in one or more Member States, or
     which hold participations in such institutions.
 ---pagebreak---                                  -té
3. The Commission and the Advisory Committee set up under Article 11 of
      Directive 77/780/EEC   shall   examine  the   outcome  of   those
      negotiations and the resulting situation.
 ---pagebreak---                                     -2?-
                                  Art icle 9
                              Final provisions
1. Member    States    shall    implement      the    laws,   regulations    and
   administrative provisions necessary to comply with the provisions
   of the present    Directive by 1 January 1993. They shall           forthwith
    inform the Commission thereof.
   When Member    States adopt   these provisions, these shall contain a
   reference    to  this   Directive    or  shall    be   accompanied   by  such
   reference at the time of their official publication. The procedure
   for such reference shall be adopted by Member States.
2. Notwithstanding    the provisions of Article 3(5) and pending           entry
   into force of the Directive on capital adequacy of investment firms
   and credit institutions, the competent authorities shall           include in
   consolidated     supervision      financial      institutions    which    are
   principally exposed to market risks in accordance with methods to
   be determined by those authorities         in the light of the particular
   nature of the risks involved.
3. Member States shall communicate to the Commission the texts of the
   main   provisions   laid  down   by   law,   regulation   or  administrative
   action which they adopt in the field governed by this Directive.
 ---pagebreak---                                    -2P-
                                 Article 10
1.  Council  Directive 83/350/EEC    is hereby repealed with  effect   from
    1 January 1993.
2.  In the following provisions, the words "Directive 83/350/EEC" shall
    be replaced by "Directive .../.../EEC":
    - Article 5 of Directive 89/299/EEC;
    - Article 12(6), Article 13(3), Article 15(2) and the fifth      indent
      of     the     first      subparagraph    of    Article 18(2)      of
      Directive 89/646/EEC;
    - Article 3(3) of Directive 89/647/EEC.
3.  In Article   1(5) of Directive 89/646/EEC and    the first   indent of
    Article 2(1) of Directive 89/647/EEC, the definition of      competent
    authorities shall be replaced by the following:
    "the national authorities which are empowered by law or regulation
    to supervise credit    institutions".
                                 Article 11
This Directive is addressed to the Member States
 ---pagebreak---  ---pagebreak---                                                                       ISSN 0254-1475
                                                                COM(91) 491 final
                                                       DOCUMENTS
  EN                                                                             10
\
                                  Catalogue number : CB-CO-91-549-EN-C
                                                               ISBN 92-77-78278-1
  Office for Official Publications of the European Communities
  L-2985 Luxembourg