Article 1 Objective
This Directive lays down rules for supplementary supervision of regulated entities which have obtained an authorisation pursuant to Article 6 of Directive 73/239/EEC, Article 6 of Directive 79/267/EEC, Article 3(1) of Directive 93/22/EEC or Article 4 of Directive 2000/12/EC, and which are part of a financial conglomerate. It also amends the relevant sectoral rules which apply to entities regulated by the Directives referred to above.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 1 Subject matter):
This Directive lays down rules for supplementary supervision of regulated entities which have obtained an authorisation in accordance with Article 6 of Directive 73/239/EEC, Article 4 of Directive 2002/83/EC ( 14 ), Article 5 of Directive 2004/39/EC ( 15 ), Article 3 of Directive 2005/68/EC ( 16 ), Article 6 of Directive 2006/48/EC ( 17 ), Article 5 of Directive 2009/65/EC ( 18 ), Article 14 of Directive 2009/138/EC ( 19 ) or Articles 6 to 11 of Directive 2011/61/EU ( 20 ), and which are part of a financial conglomerate. This Directive also amends the relevant sectoral rules which apply to entities regulated by those Directives.
Article 2 Definitions
For the purposes of this Directive: 1. ‘credit institution’ shall mean a credit institution within the meaning of the second subparagraph of Article 1(1) of Directive 2000/12/EC; 2. ‘insurance undertaking’ shall mean an insurance undertaking within the meaning of Article 6 of Directive 73/239/EEC, Article 6 of Directive 79/267/EEC or Article 1(b) of Directive 98/78/EC; 3. ‘investment firm’ shall mean an investment firm within the meaning of Article 1(2) of Directive 93/22/EEC, including the undertakings referred to in Article 2(4) of Directive 93/6/EEC; 4. ‘regulated entity’ shall mean a credit institution, an insurance undertaking or an investment firm; 5. ‘asset management company’ shall mean a management company within the meaning of Article 1a(2) of Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) ( 14 ), as well as an undertaking the registered office of which is outside the Community and which would require authorisation in accordance with Article 5(1) of that Directive if it had its registered office within the Community; 6. ‘reinsurance undertaking’ shall mean a reinsurance undertaking within the meaning of Article 1(c) of Directive 98/78/EC; 7. ‘sectoral rules’ shall mean the Community legislation relating to the prudential supervision of regulated entities, in particular laid down in Directives 73/239/EEC, 79/267/EEC, 98/78/EC, 93/6/EEC, 93/22/EEC and 2000/12/EC; 8. ‘financial sector’ shall mean a sector composed of one or more of the following entities: (a) a credit institution, a financial institution or an ancillary banking services undertaking within the meaning of Article 1(5) and (23) of Directive 2000/12/EC (the banking sector); (b) an insurance undertaking, a reinsurance undertaking or an insurance holding company within the meaning of Article 1(i) of Directive 98/78/EC (the insurance sector); (c) an investment firm or a financial institution within the meaning of Article 2(7) of Directive 93/6/EEC (the investment services sector); (d) a mixed financial holding company; 8. ‘financial sector’ shall mean a sector composed of one or more of the following entities: (a) a credit institution, a financial institution or an ancillary banking services undertaking within the meaning of Article 1(5) and (23) of Directive 2000/12/EC (the banking sector); (b) an insurance undertaking, a reinsurance undertaking or an insurance holding company within the meaning of Article 1(i) of Directive 98/78/EC (the insurance sector); (c) an investment firm or a financial institution within the meaning of Article 2(7) of Directive 93/6/EEC (the investment services sector); (d) a mixed financial holding company; 9. ‘parent undertaking’ shall mean a parent undertaking within the meaning of Article 1 of Seventh Council Directive 83/349/EEC of 13 June 1983 on consolidated accounts ( 15 ) and any undertaking which, in the opinion of the competent authorities, effectively exercises a dominant influence over another undertaking; 10. ‘subsidiary undertaking’ shall mean a subsidiary undertaking within the meaning of Article 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 subsidiary undertakings of subsidiary undertakings shall also be considered as subsidiary undertakings of the parent undertaking; 11. ‘participation’ shall mean a participation within the meaning of the first sentence of Article 17 of Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts of certain types of companies ( 16 ), or the direct or indirect ownership of 20 % or more of the voting rights or capital of an undertaking; 12. ‘group’ shall mean a group of undertakings, which consists of a parent undertaking, its subsidiaries and the entities in which the parent undertaking or its subsidiaries hold a participation, as well as undertakings linked to each other by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC; 13. ‘close links’ shall mean a situation in which two or more natural or legal persons are linked by: (a) ‘participation’, which shall mean the ownership, direct or by way of control, of 20 % or more of the voting rights or capital of an undertaking; or (b) ‘control’, which shall mean the relationship between a parent undertaking and a subsidiary, in all the cases referred to in Article 1(1) and (2) of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking; any subsidiary undertaking of a subsidiary undertaking shall also be considered a subsidiary of the parent undertaking which is at the head of those undertakings. A situation in which two or more natural or legal persons are permanently linked to one and the same person by a control relationship shall also be regarded as constituting a close link between such persons; 13. ‘close links’ shall mean a situation in which two or more natural or legal persons are linked by: (a) ‘participation’, which shall mean the ownership, direct or by way of control, of 20 % or more of the voting rights or capital of an undertaking; or (b) ‘control’, which shall mean the relationship between a parent undertaking and a subsidiary, in all the cases referred to in Article 1(1) and (2) of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking; any subsidiary undertaking of a subsidiary undertaking shall also be considered a subsidiary of the parent undertaking which is at the head of those undertakings. A situation in which two or more natural or legal persons are permanently linked to one and the same person by a control relationship shall also be regarded as constituting a close link between such persons; 14. ‘financial conglomerate’ shall mean a group which meets, subject to Article 3, the following conditions: (a) a regulated entity within the meaning of Article 1 is at the head of the group or at least one of the subsidiaries in the group is a regulated entity within the meaning of Article 1; (b) where there is a regulated entity within the meaning of Article 1 at the head of the group, it is either a parent undertaking of an entity in the financial sector, an entity which holds a participation in an entity in the financial sector, or an entity linked with an entity in the financial sector by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC; (c) where there is no regulated entity within the meaning of Article 1 at the head of the group, the group's activities mainly occur in the financial sector within the meaning of Article 3(1); (d) at least one of the entities in the group is within the insurance sector and at least one is within the banking or investment services sector; (e) the consolidated and/or aggregated activities of the entities in the group within the insurance sector and the consolidated and/or aggregated activities of the entities within the banking and investment services sector are both significant within the meaning of Article 3(2) or (3). Any subgroup of a group within the meaning of point 12 which meets the criteria in this point shall be considered as a financial conglomerate; 14. ‘financial conglomerate’ shall mean a group which meets, subject to Article 3, the following conditions: (a) a regulated entity within the meaning of Article 1 is at the head of the group or at least one of the subsidiaries in the group is a regulated entity within the meaning of Article 1; (b) where there is a regulated entity within the meaning of Article 1 at the head of the group, it is either a parent undertaking of an entity in the financial sector, an entity which holds a participation in an entity in the financial sector, or an entity linked with an entity in the financial sector by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC; (c) where there is no regulated entity within the meaning of Article 1 at the head of the group, the group's activities mainly occur in the financial sector within the meaning of Article 3(1); (d) at least one of the entities in the group is within the insurance sector and at least one is within the banking or investment services sector; (e) the consolidated and/or aggregated activities of the entities in the group within the insurance sector and the consolidated and/or aggregated activities of the entities within the banking and investment services sector are both significant within the meaning of Article 3(2) or (3). Any subgroup of a group within the meaning of point 12 which meets the criteria in this point shall be considered as a financial conglomerate; 15. ‘mixed financial holding company’ shall mean a parent undertaking, other than a regulated entity, which together with its subsidiaries, at least one of which is a regulated entity which has its head office in the Community, and other entities, constitutes a financial conglomerate; 16. ‘competent authorities’ shall mean the national authorities of the Member States which are empowered by law or regulation to supervise credit institutions, and/or insurance undertakings and/or investment firms whether on an individual or a group-wide basis; 17. ‘relevant competent authorities’ shall mean: (a) Member States' competent authorities responsible for the sectoral group-wide supervision of any of the regulated entities in a financial conglomerate; (b) the coordinator appointed in accordance with Article 10 if different from the authorities referred to in (a); (c) other competent authorities concerned, where relevant, in the opinion of the authorities referred to in (a) and (b); this opinion shall especially take into account the market share of the regulated entities of the conglomerate in other Member States, in particular if it exceeds 5 %, and the importance in the conglomerate of any regulated entity established in another Member State; 17. ‘relevant competent authorities’ shall mean: (a) Member States' competent authorities responsible for the sectoral group-wide supervision of any of the regulated entities in a financial conglomerate; (b) the coordinator appointed in accordance with Article 10 if different from the authorities referred to in (a); (c) other competent authorities concerned, where relevant, in the opinion of the authorities referred to in (a) and (b); this opinion shall especially take into account the market share of the regulated entities of the conglomerate in other Member States, in particular if it exceeds 5 %, and the importance in the conglomerate of any regulated entity established in another Member State; 18. ‘intra-group transactions’ shall mean all transactions by which regulated entities within a financial conglomerate rely either directly or indirectly upon other undertakings within the same group or upon any natural or legal person linked to the undertakings within that group by ‘close links’, for the fulfilment of an obligation, whether or not contractual, and whether or not for payment; 19. ‘risk concentration’ shall mean all exposures with a loss potential borne by entities within a financial conglomerate, which are large enough to threaten the solvency or the financial position in general of the regulated entities in the financial conglomerate; such exposures may be caused by counterparty risk/credit risk, investment risk, insurance risk, market risk, other risks, or a combination or interaction of these risks.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 2 Definitions):
For the purposes of this Directive: (1) ‘credit institution’ means a credit institution within the meaning of Article 4(1) of Directive 2006/48/EC; (2) ‘insurance undertaking’ means an insurance undertaking within the meaning of Article 13(1), (2) or (3) of Directive 2009/138/EC; (3) ‘investment firm’ means an investment firm within the meaning of point 1 of Article 4(1) of Directive 2004/39/EC, including the undertakings referred to in Article 3(1)(d) of Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions ( 21 ) or an undertaking the registered office of which is in a third country and which would require authorisation under Directive 2004/39/EC if its registered office were in the Union; (4) ‘regulated entity’ means a credit institution, an insurance undertaking, a reinsurance undertaking, an investment firm, an asset management company or an alternative investment fund manager; (5) ‘asset management company’ means a management company within the meaning of Article 2(1)(b) of Directive 2009/65/EC or an undertaking the registered office of which is in a third country and which would require authorisation under that Directive if its registered office were within the Union; (5a) ‘alternative investment fund manager’ means a manager of alternative investment funds within the meaning of Article 4(1)(b), (l) and (ab) of Directive 2011/61/EU or an undertaking the registered office of which is in a third country and which would require authorisation under that Directive if its registered office were within the Union; (6) ‘reinsurance undertaking’ means a reinsurance undertaking within the meaning of Article 13(4), (5) or (6) of Directive 2009/138/EC or a special purpose vehicle within the meaning of Article 13(26) of Directive 2009/138/EC; (7) ‘sectoral rules’ means Union legislation relating to the prudential supervision of regulated entities, in particular Directives 2004/39/EC, 2006/48/EC, 2006/49/EC and 2009/138/EC; (8) ‘financial sector’ means a sector composed of one or more of the following entities: (a) a credit institution, a financial institution or an ancillary services undertaking within the meaning of Article 4(1), (5) or (21) of Directive 2006/48/EC (hereinafter referred to collectively as ‘the banking sector’); (b) an insurance undertaking, a reinsurance undertaking or an insurance holding company within the meaning of Article 13(1), (2), (4) or (5) or of Article 212(1)(f) of Directive 2009/138/EC (hereinafter referred to collectively as ‘the insurance sector’); (c) an investment firm within the meaning of Article 3(1)(b) of Directive 2006/49/EC (hereinafter referred to collectively as ‘the investment services sector’); (8) ‘financial sector’ means a sector composed of one or more of the following entities: (a) a credit institution, a financial institution or an ancillary services undertaking within the meaning of Article 4(1), (5) or (21) of Directive 2006/48/EC (hereinafter referred to collectively as ‘the banking sector’); (b) an insurance undertaking, a reinsurance undertaking or an insurance holding company within the meaning of Article 13(1), (2), (4) or (5) or of Article 212(1)(f) of Directive 2009/138/EC (hereinafter referred to collectively as ‘the insurance sector’); (c) an investment firm within the meaning of Article 3(1)(b) of Directive 2006/49/EC (hereinafter referred to collectively as ‘the investment services sector’); (9) ‘parent undertaking’ means a parent undertaking as defined in Article 1 of Seventh Council Directive 83/349/EEC of 13 June 1983 on consolidated accounts ( 22 ) or any undertaking which, in the opinion of the competent authorities, effectively exercises a dominant influence over another undertaking; (10) ‘subsidiary undertaking’ means a subsidiary undertaking as defined in Article 1 of Directive 83/349/EEC or any undertaking over which, in the opinion of the competent authorities, a parent undertaking effectively exercises a dominant influence or all subsidiaries of such subsidiary undertakings; (11) ‘participation’ means a participation within the meaning of the first sentence of Article 17 of Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts of certain types of companies ( 23 ), or the direct or indirect ownership of 20 % or more of the voting rights or capital of an undertaking; (12) ‘group’ means a group of undertakings which consists of a parent undertaking, its subsidiaries and the entities in which the parent undertaking or its subsidiaries hold a participation, or undertakings linked to each other by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC, including any subgroup thereof; (12a) ‘control’ means the relationship between a parent undertaking and a subsidiary undertaking as set out in Article 1 of Directive 83/349/EEC, or a similar relationship between a natural or legal person and an undertaking; (13) ‘close links’ means a situation in which two or more natural or legal persons are linked by control or participation, or a situation in which two or more natural or legal persons are permanently linked to the same person by a control relationship; (14) ‘financial conglomerate’ means a group or subgroup, where a regulated entity is at the head of the group or subgroup, or where at least one of the subsidiaries in that group or subgroup is a regulated entity, and which meets the following conditions: (a) where there is a regulated entity at the head of the group or subgroup: (i) that entity is a parent undertaking of an entity in the financial sector, an entity which holds a participation in an entity in the financial sector, or an entity linked with an entity in the financial sector by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC; (ii) at least one of the entities in the group or subgroup is within the insurance sector and at least one is within the banking or investment services sector; and (iii) the consolidated or aggregated activities of the entities in the group or subgroup within the insurance sector and of the entities within the banking and investment services sector are both significant within the meaning of Article 3(2) or (3) of this Directive; or (b) where there is no regulated entity at the head of the group or subgroup: (i) the group’s or subgroup’s activities occur mainly in the financial sector within the meaning of Article 3(1) of this Directive; (ii) at least one of the entities in the group or subgroup is within the insurance sector and at least one is within the banking or investment services sector; and (iii) the consolidated or aggregated activities of the entities in the group or subgroup within the insurance sector and of the entities within the banking and investment services sector are both significant within the meaning of Article 3(2) or (3) of this Directive; (14) ‘financial conglomerate’ means a group or subgroup, where a regulated entity is at the head of the group or subgroup, or where at least one of the subsidiaries in that group or subgroup is a regulated entity, and which meets the following conditions: (a) where there is a regulated entity at the head of the group or subgroup: (i) that entity is a parent undertaking of an entity in the financial sector, an entity which holds a participation in an entity in the financial sector, or an entity linked with an entity in the financial sector by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC; (ii) at least one of the entities in the group or subgroup is within the insurance sector and at least one is within the banking or investment services sector; and (iii) the consolidated or aggregated activities of the entities in the group or subgroup within the insurance sector and of the entities within the banking and investment services sector are both significant within the meaning of Article 3(2) or (3) of this Directive; or (a) where there is a regulated entity at the head of the group or subgroup: (i) that entity is a parent undertaking of an entity in the financial sector, an entity which holds a participation in an entity in the financial sector, or an entity linked with an entity in the financial sector by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC; (ii) at least one of the entities in the group or subgroup is within the insurance sector and at least one is within the banking or investment services sector; and (iii) the consolidated or aggregated activities of the entities in the group or subgroup within the insurance sector and of the entities within the banking and investment services sector are both significant within the meaning of Article 3(2) or (3) of this Directive; or (b) where there is no regulated entity at the head of the group or subgroup: (i) the group’s or subgroup’s activities occur mainly in the financial sector within the meaning of Article 3(1) of this Directive; (ii) at least one of the entities in the group or subgroup is within the insurance sector and at least one is within the banking or investment services sector; and (iii) the consolidated or aggregated activities of the entities in the group or subgroup within the insurance sector and of the entities within the banking and investment services sector are both significant within the meaning of Article 3(2) or (3) of this Directive; (b) where there is no regulated entity at the head of the group or subgroup: (i) the group’s or subgroup’s activities occur mainly in the financial sector within the meaning of Article 3(1) of this Directive; (iii) the consolidated or aggregated activities of the entities in the group or subgroup within the insurance sector and of the entities within the banking and investment services sector are both significant within the meaning of Article 3(2) or (3) of this Directive; (15) ‘mixed financial holding company’ means a parent undertaking, other than a regulated entity, which, together with its subsidiaries — at least one of which is a regulated entity which has its registered office in the Union — and other entities, constitutes a financial conglomerate; (16) ‘competent authorities’ means the national authorities of the Member States which are empowered by law or regulation to supervise credit institutions, insurance undertakings, reinsurance undertakings, investment firms, asset management companies or alternative investment fund managers whether on an individual or group-wide basis; (17) ‘relevant competent authorities’ means: (a) Member States’ competent authorities responsible for the sectoral group-wide supervision of any of the regulated entities in a financial conglomerate, in particular of the ultimate parent undertaking of a sector; (b) the coordinator appointed in accordance with Article 10 if different from the authorities referred to in point (a); (c) where appropriate, other competent authorities relevant to the opinion of the authorities referred to in points (a) and (b); (17) ‘relevant competent authorities’ means: (a) Member States’ competent authorities responsible for the sectoral group-wide supervision of any of the regulated entities in a financial conglomerate, in particular of the ultimate parent undertaking of a sector; (b) the coordinator appointed in accordance with Article 10 if different from the authorities referred to in point (a); (c) where appropriate, other competent authorities relevant to the opinion of the authorities referred to in points (a) and (b); (18) ‘intra-group transactions’ means all transactions by which regulated entities within a financial conglomerate rely directly or indirectly on other undertakings within the same group or on any natural or legal person linked to the undertakings within that group by close links, for the fulfilment of an obligation, whether or not contractual, and whether or not for payment; (19) ‘risk concentration’ means all risk exposures with a loss potential which is large enough to threaten the solvency or the financial position in general of the regulated entities in a financial conglomerate, whether such exposures are caused by counterparty risk/credit risk, investment risk, insurance risk, market risk, other risks, or a combination or interaction of such risks. Until the entry into force of any regulatory technical standards adopted in accordance with Article 21a(1)(b), the opinion referred to in point (17)(c) shall, in particular, take into account the market share of the regulated entities of the financial conglomerate in other Member States, in particular if it exceeds 5 %, and the importance in the financial conglomerate of any regulated entity established in another Member State. (19) ‘risk concentration’ means all risk exposures with a loss potential which is large enough to threaten the solvency or the financial position in general of the regulated entities in a financial conglomerate, whether such exposures are caused by counterparty risk/credit risk, investment risk, insurance risk, market risk, other risks, or a combination or interaction of such risks. Until the entry into force of any regulatory technical standards adopted in accordance with Article 21a(1)(b), the opinion referred to in point (17)(c) shall, in particular, take into account the market share of the regulated entities of the financial conglomerate in other Member States, in particular if it exceeds 5 %, and the importance in the financial conglomerate of any regulated entity established in another Member State.
Article 3 Thresholds for identifying a financial conglomerate
1. For the purposes of determining whether the activities of a group mainly occur in the financial sector, within the meaning of Article 2(14)(c), the ratio of the balance sheet total of the regulated and non-regulated financial sector entities in the group to the balance sheet total of the group as a whole should exceed 40 %. 2. For the purposes of determining whether activities in different financial sectors are significant within the meaning of Article 2(14)(e), for each financial sector the average of the ratio of the balance sheet total of that financial sector to the balance sheet total of the financial sector entities in the group and the ratio of the solvency requirements of the same financial sector to the total solvency requirements of the financial sector entities in the group should exceed 10 %. For the purposes of this Directive, the smallest financial sector in a financial conglomerate is the sector with the smallest average and the most important financial sector in a financial conglomerate is the sector with the highest average. For the purposes of calculating the average and for the measurement of the smallest and the most important financial sectors, the banking sector and the investment services sector shall be considered together. 3. Cross-sectoral activities shall also be presumed to be significant within the meaning of Article 2(14)(e) if the balance sheet total of the smallest financial sector in the group exceeds EUR 6 billion. If the group does not reach the threshold referred to in paragraph 2, the relevant competent authorities may decide by common agreement not to regard the group as a financial conglomerate, or not to apply the provisions of Articles 7, 8 or 9, if they are of the opinion that the inclusion of the group in the scope of this Directive or the application of such provisions is not necessary or would be inappropriate or misleading with respect to the objectives of supplementary supervision, taking into account, for instance, the fact that: (a) the relative size of its smallest financial sector does not exceed 5 %, measured either in terms of the average referred to in paragraph 2 or in terms of the balance sheet total or the solvency requirements of such financial sector; or (b) the market share does not exceed 5 % in any Member State, measured in terms of the balance sheet total in the banking or investment services sectors and in terms of gross premiums written in the insurance sector. Decisions taken in accordance with this paragraph shall be notified to the other competent authorities concerned. 4. For the application of paragraphs 1, 2 and 3, the relevant competent authorities may by common agreement: (a) exclude an entity when calculating the ratios, in the cases referred to in Article 6(5); (b) take into account compliance with the thresholds envisaged in paragraphs 1 and 2 for three consecutive years so as to avoid sudden regime shifts, and disregard such compliance if there are significant changes in the group's structure. Where a financial conglomerate has been identified according to paragraphs 1, 2 and 3, the decisions referred to in the first subparagraph of this paragraph shall be taken on the basis of a proposal made by the coordinator of that financial conglomerate. 5. For the application of paragraphs 1 and 2, the relevant competent authorities may, in exceptional cases and by common agreement, replace the criterion based on balance sheet total with one or both of the following parameters or add one or both of these parameters, if they are of the opinion that these parameters are of particular relevance for the purposes of supplementary supervision under this Directive: income structure, off-balance-sheet activities. 6. For the application of paragraphs 1 and 2, if the ratios referred to in those paragraphs fall below 40 % and 10 % respectively for conglomerates already subject to supplementary supervision, a lower ratio of 35 % and 8 % respectively shall apply for the following three years to avoid sudden regime shifts. Similarly, for the application of paragraph 3, if the balance sheet total of the smallest financial sector in the group falls below EUR 6 billion for conglomerates already subject to supplementary supervision, a lower figure of EUR 5 billion shall apply for the following three years to avoid sudden regime shifts. During the period referred to in this paragraph, the coordinator may, with the agreement of the other relevant competent authorities, decide that the lower ratios or the lower amount referred to in this paragraph shall cease to apply. 7. The calculations referred to in this Article regarding the balance sheet shall be made on the basis of the aggregated balance sheet total of the entities of the group, according to their annual accounts. For the purposes of this calculation, undertakings in which a participation is held shall be taken into account as regards the amount of their balance sheet total corresponding to the aggregated proportional share held by the group. However, where consolidated accounts are available, they shall be used instead of aggregated accounts. The solvency requirements referred to in paragraphs 2 and 3 shall be calculated in accordance with the provisions of the relevant sectoral rules.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 3 Thresholds for identifying a financial conglomerate):
1. For the purposes of determining whether the activities of a group mainly occur in the financial sector, within the meaning of Article 2(14)(b)(i), the ratio of the balance sheet total of the regulated and non-regulated financial sector entities in the group to the balance sheet total of the group as a whole should exceed 40 %. 2. For the purposes of determining whether activities in different financial sectors are significant within the meaning of Article 2(14)(a)(iii) or (14)(b)(iii), for each financial sector the average of the ratio of the balance sheet total of that financial sector to the balance sheet total of the financial sector entities in the group and the ratio of the solvency requirements of the same financial sector to the total solvency requirements of the financial sector entities in the group should exceed 10 %. For the purposes of this Directive, the smallest financial sector in a financial conglomerate is the sector with the smallest average and the most important financial sector in a financial conglomerate is the sector with the highest average. For the purposes of calculating the average and for the measurement of the smallest and the most important financial sectors, the banking sector and the investment services sector shall be considered together. Asset management companies shall be added to the sector to which they belong within the group. If they do not belong exclusively to one sector within the group, they shall be added to the smallest financial sector. Alternative investment fund managers shall be added to the sector to which they belong within the group. If they do not belong exclusively to one sector within the group, they shall be added to the smallest financial sector. 3. Cross-sectoral activities shall also be presumed to be significant within the meaning of Article 2(14)(a)(iii) or (14)(b)(iii) if the balance sheet total of the smallest financial sector in the group exceeds EUR 6 billion. If the group does not reach the threshold referred to in paragraph 2 of this Article, the relevant competent authorities may decide by common agreement not to regard the group as a financial conglomerate. They may also decide not to apply the provisions of Article 7, 8, or 9, if they are of the opinion that the inclusion of the group in the scope of this Directive or the application of such provisions is not necessary or would be inappropriate or misleading with respect to the objectives of supplementary supervision. Decisions taken in accordance with this paragraph shall be notified to the other competent authorities and shall, save in exceptional circumstances, be made public by the competent authorities. 3a. If the group reaches the threshold referred to in paragraph 2 of this Article, but the smallest sector does not exceed EUR 6 billion, the relevant competent authorities may decide by common agreement not to regard the group as a financial conglomerate. They may also decide not to apply the provisions of Article 7, 8, or 9, if they are of the opinion that the inclusion of the group in the scope of this Directive or the application of such provisions is not necessary or would be inappropriate or misleading with respect to the objectives of supplementary supervision. 4. For the application of paragraphs 1, 2 and 3, the relevant competent authorities may by common agreement: (a) exclude an entity when calculating the ratios, in the cases referred to in Article 6(5), unless the entity moved from a Member State to a third country and there is evidence that the entity changed its location in order to avoid regulation; (b) take into account compliance with the thresholds envisaged in paragraphs 1 and 2 for three consecutive years so as to avoid sudden regime shifts, and disregard such compliance if there are significant changes in the group's structure; (c) exclude one or more participations in the smaller sector if such participations are decisive for the identification of a financial conglomerate, and are collectively of negligible interest with respect to the objectives of supplementary supervision. Where a financial conglomerate has been identified according to paragraphs 1, 2 and 3, the decisions referred to in the first subparagraph of this paragraph shall be taken on the basis of a proposal made by the coordinator of that financial conglomerate. 5. For the application of paragraphs 1 and 2, the relevant competent authorities may, in exceptional cases and by common agreement, replace the criterion based on balance sheet total with one or more of the following parameters or add one or more of these parameters, if they are of the opinion that those parameters are of particular relevance for the purpose of supplementary supervision under this Directive: income structure, off-balance sheet activities, total assets under management. 6. For the application of paragraphs 1 and 2, if the ratios referred to in those paragraphs fall below 40 % and 10 % respectively for conglomerates already subject to supplementary supervision, a lower ratio of 35 % and 8 % respectively shall apply for the following three years to avoid sudden regime shifts. Similarly, for the application of paragraph 3, if the balance sheet total of the smallest financial sector in the group falls below EUR 6 billion for conglomerates already subject to supplementary supervision, a lower figure of EUR 5 billion shall apply for the following three years to avoid sudden regime shifts. During the period referred to in this paragraph, the coordinator may, with the agreement of the other relevant competent authorities, decide that the lower ratios or the lower amount referred to in this paragraph shall cease to apply. 7. The calculations referred to in this Article regarding the balance sheet shall be made on the basis of the aggregated balance sheet total of the entities of the group, according to their annual accounts. For the purposes of this calculation, undertakings in which a participation is held shall be taken into account as regards the amount of their balance sheet total corresponding to the aggregated proportional share held by the group. However, where consolidated accounts are available, they shall be used instead of aggregated accounts. The solvency requirements referred to in paragraphs 2 and 3 shall be calculated in accordance with the provisions of the relevant sectoral rules. 8. The European Supervisory Authority (European Banking Authority) established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council ( 24 ) (EBA), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council ( 25 ) (EIOPA) and the European Supervisory Authority (European Securities and Markets Authority) established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council ( 26 ) (ESMA) (hereinafter collectively referred to as ‘the ESA’) shall, through the Joint Committee of the ESA (Joint Committee), issue common guidelines aimed at the convergence of supervisory practices with regard to the application of paragraphs 2, 3, 3a, 4 and 5 of this Article. 9. The competent authorities shall, on an annual basis, reassess waivers of the application of supplementary supervision and shall review the quantitative indicators set out in this Article and risk-based assessments applied to financial groups.
Article 4 Identifying a financial conglomerate
1. Competent authorities which have authorised regulated entities shall, on the basis of Articles 2, 3 and 5, identify any group that falls under the scope of this Directive. For this purpose: — competent authorities which have authorised regulated entities in the group shall, where necessary, cooperate closely, — if a competent authority is of the opinion that a regulated entity authorised by that competent authority is a member of a group which may be a financial conglomerate, which has not already been identified according to this Directive, the competent authority shall communicate its view to the other competent authorities concerned. 2. The coordinator appointed in accordance with Article 10 shall inform the parent undertaking at the head of a group or, in the absence of a parent undertaking, the regulated entity with the largest balance sheet total in the most important financial sector in a group, that the group has been identified as a financial conglomerate and of the appointment of the coordinator. The coordinator shall also inform the competent authorities which have authorised regulated entities in the group and the competent authorities of the Member State in which the mixed financial holding company has its head office, and the Joint Committee of the European Supervisory Authorities (ESA) established by Articles 54 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority) ( 17 ), of Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority) ( 18 ) and of Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority) ( 19 ) (hereinafter ‘the Joint Committee’), respectively. 3. The Joint Committee shall publish on its website and keep up-to-date the list of identified financial conglomerates. That information shall be available by hyperlink on each of the European Supervisory Authority's websites.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 4 Identifying a financial conglomerate):
1. Competent authorities which have authorised regulated entities shall, on the basis of Articles 2, 3 and 5, identify any group that falls under the scope of this Directive. For that purpose: — competent authorities which have authorised regulated entities in the group shall cooperate closely, — if a competent authority is of the opinion that a regulated entity authorised by that competent authority is a member of a group which may be a financial conglomerate and which has not already been identified in accordance with this Directive, the competent authority shall communicate its view to the other competent authorities concerned and to the Joint Committee. 2. The coordinator appointed in accordance with Article 10 shall inform the parent undertaking at the head of a group or, in the absence of a parent undertaking, the regulated entity with the largest balance sheet total in the most important financial sector in a group, that the group has been identified as a financial conglomerate and of the appointment of the coordinator. The coordinator shall also inform the competent authorities which have authorised regulated entities in the group, the competent authorities of the Member State in which the mixed financial holding company has its head office and the Joint Committee. 3. The Joint Committee shall publish and keep up-to-date on its website the list of financial conglomerates defined in accordance with Article 2(14). That information shall be available by hyperlink on each of the ESA's websites. The name of each regulated entity referred to in Article 1 which is part of a financial conglomerate shall be entered on a list, which the Joint Committee shall publish and keep up-to-date on its website.
Article 5 Scope of supplementary supervision of regulated entities referred to in Article 1
1. Without prejudice to the provisions on supervision contained in the sectoral rules, Member States shall provide for the supplementary supervision of the regulated entities referred to in Article 1, to the extent and in the manner prescribed in this Directive. 2. The following regulated entities shall be subject to supplementary supervision at the level of the financial conglomerate in accordance with Articles 6 to 17: (a) every regulated entity which is at the head of a financial conglomerate; (b) every regulated entity, the parent undertaking of which is a mixed financial holding company which has its head office in the Community; (c) every regulated entity linked with another financial sector entity by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC. Where a financial conglomerate is a subgroup of another financial conglomerate which meets the requirements of the first subparagraph, Member States may apply Articles 6 to 17 to the regulated entities within the latter group only and any reference in the Directive to the terms group and financial conglomerate will then be understood as referring to that latter group. 3. Every regulated entity which is not subject to supplementary supervision in accordance with paragraph 2, the parent undertaking of which is a regulated entity or a mixed financial holding company, having its head office outside the Community, shall be subject to supplementary supervision at the level of the financial conglomerate to the extent and in the manner prescribed in Article 18. 4. Where persons hold participations or capital ties in one or more regulated entities or exercise significant influence over such entities without holding a participation or capital ties, other than the cases referred to in paragraphs 2 and 3, the relevant competent authorities shall, by common agreement and in conformity with national law, determine whether and to what extent supplementary supervision of the regulated entities is to be carried out, as if they constitute a financial conglomerate. In order to apply such supplementary supervision, at least one of the entities must be a regulated entity as referred to in Article 1 and the conditions set out in Article 2(14)(d) and (e) must be met. The relevant competent authorities shall take their decision, taking into account the objectives of the supplementary supervision as provided for by this Directive. For the purposes of applying the first subparagraph to ‘cooperative groups’, the competent authorities must take into account the public financial commitment of these groups with respect to other financial entities. 5. Without prejudice to Article 13, the exercise of supplementary supervision at the level of the financial conglomerate shall in no way imply that the competent authorities are required to play a supervisory role in relation to mixed financial holding companies, third-country regulated entities in a financial conglomerate or unregulated entities in a financial conglomerate, on a stand-alone basis.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 5 Scope of supplementary supervision of regulated entities referred to in Article 1):
1. Without prejudice to the provisions on supervision contained in the sectoral rules, Member States shall provide for the supplementary supervision of the regulated entities referred to in Article 1, to the extent and in the manner prescribed in this Directive. 2. The following regulated entities shall be subject to supplementary supervision at the level of the financial conglomerate in accordance with Articles 6 to 17: (a) every regulated entity which is at the head of a financial conglomerate; (b) every regulated entity, the parent undertaking of which is a mixed financial holding company which has its head office in the Union; (c) every regulated entity linked with another financial sector entity by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC. Where a financial conglomerate is a subgroup of another financial conglomerate which meets the requirements of the first subparagraph, Member States may apply Articles 6 to 17 to the regulated entities within the latter group only and any reference in the Directive to the terms group and financial conglomerate will then be understood as referring to that latter group. 3. Every regulated entity which is not subject to supplementary supervision in accordance with paragraph 2, the parent undertaking of which is a regulated entity or a mixed financial holding company which has its head office in a third country, shall be subject to supplementary supervision at the level of the financial conglomerate to the extent and in the manner prescribed in Article 18. 4. Where persons hold participations or capital ties in one or more regulated entities or exercise significant influence over such entities without holding a participation or capital ties, other than the cases referred to in paragraphs 2 and 3, the relevant competent authorities shall, by common agreement and in conformity with national law, determine whether and to what extent supplementary supervision of the regulated entities is to be carried out, as if they constitute a financial conglomerate. In order to apply such supplementary supervision, at least one of the entities must be a regulated entity as referred to in Article 1 and the conditions set out in Article 2(14)(a)(ii) or (14)(b)(ii) and Article 2(14)(a)(iii) or (14)(b)(iii) must be met. The relevant competent authorities shall take their decision, taking into account the objectives of the supplementary supervision as provided for by this Directive. For the purposes of applying the first subparagraph to ‘cooperative groups’, the competent authorities must take into account the public financial commitment of these groups with respect to other financial entities. 5. Without prejudice to Article 13, the exercise of supplementary supervision at the level of the financial conglomerate shall in no way imply that the competent authorities are required to play a supervisory role in relation to mixed financial holding companies, third-country regulated entities in a financial conglomerate or unregulated entities in a financial conglomerate, on a stand-alone basis.
Article 6 Capital adequacy
1. Without prejudice to the sectoral rules, supplementary supervision of the capital adequacy of the regulated entities in a financial conglomerate shall be exercised in accordance with the rules laid down in Article 9(2) to (5), in Section 3 of this Chapter, and in Annex I. 2. The Member States shall require regulated entities in a financial conglomerate to ensure that own funds are available at the level of the financial conglomerate which are always at least equal to the capital adequacy requirements as calculated in accordance with Annex I. The Member States shall also require regulated entities to have in place adequate capital adequacy policies at the level of the financial conglomerate. The requirements referred to in the first and second subparagraphs shall be subject to supervisory overview by the coordinator in accordance with Section 3. The coordinator shall ensure that the calculation referred to in the first subparagraph is carried out at least once a year, either by the regulated entities or by the mixed financial holding company. The results of the calculation and the relevant data for the calculation shall be submitted to the coordinator by the regulated entity within the meaning of Article 1 which is at the head of the financial conglomerate, or, where the financial conglomerate is not headed by a regulated entity within the meaning of Article 1, by the mixed financial holding company or by the regulated entity in the financial conglomerate identified by the coordinator after consultation with the other relevant competent authorities and with the financial conglomerate. 3. For the purposes of calculating the capital adequacy requirements referred to in the first subparagraph of paragraph 2, the following entities shall be included in the scope of supplementary supervision in the manner and to the extent defined in Annex I: (a) a credit institution, a financial institution or an ancillary banking services undertaking within the meaning of Article 1(5) and (23) of Directive 2000/12/EC; (b) an insurance undertaking, a reinsurance undertaking or an insurance holding company within the meaning of Article 1(i) of Directive 98/78/EC; (c) an investment firm or a financial institution within the meaning of Article 2(7) of Directive 93/6/EEC; (d) mixed financial holding companies. 4. When calculating the supplementary capital adequacy requirements with regard to a financial conglomerate by applying method 1 (Accounting consolidation) referred to in Annex I, the own funds and the solvency requirements of the entities in the group shall be calculated by applying the corresponding sectoral rules on the form and extent of consolidation as laid down in particular in Article 54 of Directive 2000/12/EC and Annex I.1.B. of Directive 98/78/EC. When applying methods 2 or 3 (Deduction and aggregation, Book value/Requirement deduction) referred to in Annex I, the calculation shall take account of the proportional share held by the parent undertaking or undertaking which holds a participation in another entity of the group. ‘Proportional share’ means the proportion of the subscribed capital which is held, directly or indirectly, by that undertaking. 5. The coordinator may decide not to include a particular entity in the scope when calculating the supplementary capital adequacy requirements in the following cases: (a) if the entity is situated in a third country where there are legal impediments to the transfer of the necessary information, without prejudice to the sectoral rules regarding the obligation of competent authorities to refuse authorisation where the effective exercise of their supervisory functions is prevented; (b) if the entity is of negligible interest with respect to the objectives of the supplementary supervision of regulated entities in a financial conglomerate; (c) if the inclusion of the entity would be inappropriate or misleading with respect to the objectives of supplementary supervision. However, if several entities are to be excluded pursuant to (b) of the first subparagraph, they must nevertheless be included when collectively they are of non-negligible interest. In the case mentioned in (c) of the first subparagraph the coordinator shall, except in cases of urgency, consult the other relevant competent authorities before taking a decision. When the coordinator does not include a regulated entity in the scope under one of the cases provided for in (b) and (c) of the first subparagraph, the competent authorities of the Member State in which that entity is situated may ask the entity which is at the head of the financial conglomerate for information which may facilitate their supervision of the regulated entity.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 6 Capital adequacy):
1. Without prejudice to the sectoral rules, supplementary supervision of the capital adequacy of the regulated entities in a financial conglomerate shall be exercised in accordance with the rules laid down in Article 9(2) to (5), in Section 3 of this Chapter, and in Annex I. 2. The Member States shall require regulated entities in a financial conglomerate to ensure that own funds are available at the level of the financial conglomerate which are always at least equal to the capital adequacy requirements as calculated in accordance with Annex I. The Member States shall also require regulated entities to have in place adequate capital adequacy policies at the level of the financial conglomerate. The requirements referred to in the first and second subparagraphs shall be subject to supervisory overview by the coordinator in accordance with Section 3. The coordinator shall ensure that the calculation referred to in the first subparagraph is carried out at least once a year, either by the regulated entities or by the mixed financial holding company. The results of the calculation and the relevant data for the calculation shall be submitted to the coordinator by the regulated entity within the meaning of Article 1 which is at the head of the financial conglomerate, or, where the financial conglomerate is not headed by a regulated entity within the meaning of Article 1, by the mixed financial holding company or by the regulated entity in the financial conglomerate identified by the coordinator after consultation with the other relevant competent authorities and with the financial conglomerate. 3. For the purposes of calculating the capital adequacy requirements referred to in the first subparagraph of paragraph 2, the following entities shall be included in the scope of supplementary supervision in accordance with Annex I: (a) a credit institution, a financial institution or an ancillary services undertaking; (b) an insurance undertaking, a reinsurance undertaking or an insurance holding company; (c) an investment firm; (d) a mixed financial holding company. 4. When calculating the supplementary capital adequacy requirements with regard to a financial conglomerate by applying method 1 (Accounting consolidation) referred to in Annex I to this Directive, the own funds and the solvency requirements of the entities in the group shall be calculated by applying the corresponding sectoral rules on the form and extent of consolidation as laid down in particular in Articles 133 and 134 of Directive 2006/48/EC and Article 221 of Directive 2009/138/EC. When applying method 2 (Deduction and aggregation) referred to in Annex I, the calculation shall take account of the proportion of the subscribed capital which is directly or indirectly held by the parent undertaking or undertaking which holds a participation in another entity of the group. 5. The coordinator may decide not to include a particular entity in the scope when calculating the supplementary capital adequacy requirements in the following cases: (a) if the entity is situated in a third country where there are legal impediments to the transfer of the necessary information, without prejudice to the sectoral rules regarding the obligation of competent authorities to refuse authorisation where the effective exercise of their supervisory functions is prevented; (b) if the entity is of negligible interest with respect to the objectives of the supplementary supervision of regulated entities in a financial conglomerate; (c) if the inclusion of the entity would be inappropriate or misleading with respect to the objectives of supplementary supervision. However, if several entities are to be excluded pursuant to (b) of the first subparagraph, they must nevertheless be included when collectively they are of non-negligible interest. In the case mentioned in (c) of the first subparagraph the coordinator shall, except in cases of urgency, consult the other relevant competent authorities before taking a decision. When the coordinator does not include a regulated entity in the scope under one of the cases provided for in (b) and (c) of the first subparagraph, the competent authorities of the Member State in which that entity is situated may ask the entity which is at the head of the financial conglomerate for information which may facilitate their supervision of the regulated entity.
Article 7 Risk concentration
1. Without prejudice to the sectoral rules, supplementary supervision of the risk concentration of regulated entities in a financial conglomerate shall be exercised in accordance with the rules laid down in Article 9(2) to (4), in Section 3 of this Chapter and in Annex II. 2. The Member States shall require regulated entities or mixed financial holding companies to report on a regular basis and at least annually to the coordinator any significant risk concentration at the level of the financial conglomerate, in accordance with the rules laid down in this Article and in Annex II. The necessary information shall be submitted to the coordinator by the regulated entity within the meaning of Article 1 which is at the head of the financial conglomerate or, where the financial conglomerate is not headed by a regulated entity within the meaning of Article 1, by the mixed financial holding company or by the regulated entity in the financial conglomerate identified by the coordinator after consultation with the other relevant competent authorities and with the financial conglomerate. These risk concentrations shall be subject to supervisory overview by the coordinator in accordance with Section 3. 3. Pending further coordination of Community legislation, Member States may set quantitative limits or allow their competent authorities to set quantitative limits, or take other supervisory measures which would achieve the objectives of supplementary supervision, with regard to any risk concentration at the level of a financial conglomerate. 4. Where a financial conglomerate is headed by a mixed financial holding company, the sectoral rules regarding risk concentration of the most important financial sector in the financial conglomerate, if any, shall apply to that sector as a whole, including the mixed financial holding company.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 7 Risk concentration):
1. Without prejudice to the sectoral rules, supplementary supervision of the risk concentration of regulated entities in a financial conglomerate shall be exercised in accordance with the rules laid down in Article 9(2) to (4), in Section 3 of this Chapter and in Annex II. 2. The Member States shall require regulated entities or mixed financial holding companies to report on a regular basis and at least annually to the coordinator any significant risk concentration at the level of the financial conglomerate, in accordance with the rules laid down in this Article and in Annex II. The necessary information shall be submitted to the coordinator by the regulated entity within the meaning of Article 1 which is at the head of the financial conglomerate or, where the financial conglomerate is not headed by a regulated entity within the meaning of Article 1, by the mixed financial holding company or by the regulated entity in the financial conglomerate identified by the coordinator after consultation with the other relevant competent authorities and with the financial conglomerate. These risk concentrations shall be subject to supervisory overview by the coordinator in accordance with Section 3. 3. Pending further coordination of Union legislation, Member States may set quantitative limits, allow their competent authorities to set quantitative limits, or adopt other supervisory measures which would achieve the objectives of supplementary supervision, with regard to any risk concentration at the level of a financial conglomerate. 4. Where a financial conglomerate is headed by a mixed financial holding company, the sectoral rules regarding risk concentration of the most important financial sector in the financial conglomerate, if any, shall apply to that sector as a whole, including the mixed financial holding company. 5. The ESA shall, through the Joint Committee, issue common guidelines aimed at the convergence of supervisory practices with regard to the application of supplementary supervision of risk concentration as provided for in paragraphs 1 to 4 of this Article. In order to avoid duplication, the guidelines shall ensure that the application of the supervisory tools as provided for in this Article is aligned to the application of Articles 106 to 118 of Directive 2006/48/EC and of Article 244 of Directive 2009/138/EC. They shall issue specific common guidelines on the application of paragraphs 1 to 4 of this Article to participations of the financial conglomerate in cases where national company law provisions obstruct the application of Article 14(2) of this Directive.
Article 8 Intra-group transactions
1. Without prejudice to the sectoral rules, supplementary supervision of intra-group transactions of regulated entities in a financial conglomerate shall be exercised in accordance with the rules laid down in Article 9(2) to (4), in Section 3 of this Chapter, and in Annex II. 2. The Member States shall require regulated entities or mixed financial holding companies to report, on a regular basis and at least annually, to the coordinator all significant intra-group transactions of regulated entities within a financial conglomerate, in accordance with the rules laid down in this Article and in Annex II. Insofar as no definition of the thresholds referred to in the last sentence of the first paragraph of Annex II has been drawn up, an intra-group transaction shall be presumed to be significant if its amount exceeds at least 5 % of the total amount of capital adequacy requirements at the level of a financial conglomerate. The necessary information shall be submitted to the coordinator by the regulated entity within the meaning of Article 1 which is at the head of the financial conglomerate or, where the financial conglomerate is not headed by a regulated entity within the meaning of Article 1, by the mixed financial holding company or by the regulated entity in the financial conglomerate identified by the coordinator after consultation with the other relevant competent authorities and with the financial conglomerate. These intra-group transactions shall be subject to supervisory overview by the coordinator. 3. Pending further coordination of Community legislation, Member States may set quantitative limits and qualitative requirements or allow their competent authorities to set quantitative limits and qualitative requirements, or take other supervisory measures that would achieve the objectives of supplementary supervision, with regard to intra-group transactions of regulated entities within a financial conglomerate. 4. Where a financial conglomerate is headed by a mixed financial holding company, the sectoral rules regarding intra-group transactions of the most important financial sector in the financial conglomerate shall apply to that sector as a whole, including the mixed financial holding company.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 8 Intra-group transactions):
1. Without prejudice to the sectoral rules, supplementary supervision of intra-group transactions of regulated entities in a financial conglomerate shall be exercised in accordance with the rules laid down in Article 9(2) to (4), in Section 3 of this Chapter, and in Annex II. 2. The Member States shall require regulated entities or mixed financial holding companies to report, on a regular basis and at least annually, to the coordinator all significant intra-group transactions of regulated entities within a financial conglomerate, in accordance with the rules laid down in this Article and in Annex II. Insofar as no definition of the thresholds referred to in the last sentence of the first paragraph of Annex II has been drawn up, an intra-group transaction shall be presumed to be significant if its amount exceeds at least 5 % of the total amount of capital adequacy requirements at the level of a financial conglomerate. The necessary information shall be submitted to the coordinator by the regulated entity within the meaning of Article 1 which is at the head of the financial conglomerate or, where the financial conglomerate is not headed by a regulated entity within the meaning of Article 1, by the mixed financial holding company or by the regulated entity in the financial conglomerate identified by the coordinator after consultation with the other relevant competent authorities and with the financial conglomerate. These intra-group transactions shall be subject to supervisory overview by the coordinator. 3. Pending further coordination of Union legislation, Member States may set quantitative limits and qualitative requirements, allow their competent authorities to set quantitative limits or qualitative requirements, or take other supervisory measures that would achieve the objectives of supplementary supervision, with regard to intra-group transactions of regulated entities within a financial conglomerate. 4. Where a financial conglomerate is headed by a mixed financial holding company, the sectoral rules regarding intra-group transactions of the most important financial sector in the financial conglomerate shall apply to that sector as a whole, including the mixed financial holding company. 5. The ESA shall, through the Joint Committee, issue common guidelines aimed at the convergence of supervisory practices with regard to the application of supplementary supervision of intra-group transactions as provided for in paragraphs 1 to 4 of this Article. In order to avoid duplication, the guidelines shall ensure that the application of the supervisory tools, as provided for in this Article, is aligned to the application of Article 245 of Directive 2009/138/EC. They shall issue specific common guidelines on the application of paragraphs 1 to 4 of this Article to participations of the financial conglomerate in cases where national company law provisions obstruct the application of Article 14(2) of this Directive.
Article 9 Internal control mechanisms and risk management processes
1. The Member States shall require regulated entities to have, in place at the level of the financial conglomerate, adequate risk management processes and internal control mechanisms, including sound administrative and accounting procedures. 2. The risk management processes shall include: (a) sound governance and management with the approval and periodical review of the strategies and policies by the appropriate governing bodies at the level of the financial conglomerate with respect to all the risks they assume; (b) adequate capital adequacy policies in order to anticipate the impact of their business strategy on risk profile and capital requirements as determined in accordance with Article 6 and Annex I; (c) adequate procedures to ensure that their risk monitoring systems are well integrated into their organisation and that all measures are taken to ensure that the systems implemented in all the undertakings included in the scope of supplementary supervision are consistent so that the risks can be measured, monitored and controlled at the level of the financial conglomerate; (d) arrangements in place to contribute to and develop, if required, adequate recovery and resolution arrangements and plans. Such arrangements shall be updated regularly. 3. The internal control mechanisms shall include: (a) adequate mechanisms as regards capital adequacy to identify and measure all material risks incurred and to appropriately relate own funds to risks; (b) sound reporting and accounting procedures to identify, measure, monitor and control the intra-group transactions and the risk concentration. 4. The Member States shall ensure that, in all undertakings included in the scope of supplementary supervision pursuant to Article 5, there are adequate internal control mechanisms for the production of any data and information which would be relevant for the purposes of the supplementary supervision. 5. The processes and mechanisms referred to in paragraphs 1 to 4 shall be subject to supervisory overview by the coordinator.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 9 Internal control mechanisms and risk management processes):
1. The Member States shall require regulated entities to have, in place at the level of the financial conglomerate, adequate risk management processes and internal control mechanisms, including sound administrative and accounting procedures. 2. The risk management processes shall include: (a) sound governance and management with the approval and periodical review of the strategies and policies by the appropriate governing bodies at the level of the financial conglomerate with respect to all the risks they assume; (b) adequate capital adequacy policies in order to anticipate the impact of their business strategy on risk profile and capital requirements as determined in accordance with Article 6 and Annex I; (c) adequate procedures to ensure that their risk monitoring systems are well integrated into their organisation and that all measures are taken to ensure that the systems implemented in all the undertakings included in the scope of supplementary supervision are consistent so that the risks can be measured, monitored and controlled at the level of the financial conglomerate; (d) arrangements in place to contribute to and develop, if required, adequate recovery and resolution arrangements and plans. Such arrangements shall be updated regularly. 3. The internal control mechanisms shall include: (a) adequate mechanisms as regards capital adequacy to identify and measure all material risks incurred and to appropriately relate own funds to risks; (b) sound reporting and accounting procedures to identify, measure, monitor and control the intra-group transactions and the risk concentration. 4. The Member States shall ensure that, in all undertakings included in the scope of supplementary supervision pursuant to Article 5, there are adequate internal control mechanisms for the production of any data and information which would be relevant for the purposes of the supplementary supervision. The Member States shall require the regulated entities, at the level of the financial conglomerate, to regularly provide their competent authority with details on their legal structure and governance and organisational structure including all regulated entities, non-regulated subsidiaries and significant branches. The Member States shall require the regulated entities to disclose publicly, at the level of the financial conglomerate, on an annual basis, either in full or by way of references to equivalent information, a description of their legal structure and governance and organisational structure. 5. The processes and mechanisms referred to in paragraphs 1 to 4 shall be subject to supervisory overview by the coordinator. 6. Competent authorities shall align the application of the supplementary supervision of internal control mechanisms and risk management processes as provided for in this Article with the supervisory review processes as provided for by Article 124 of Directive 2006/48/EC and Article 248 of Directive 2009/138/EC. To this end, the ESA shall, through the Joint Committee, issue common guidelines aimed at the convergence of supervisory practices with regard to the application of supplementary supervision of internal control mechanisms and risk management processes as provided for in this Article, as well as on the consistency with the supervisory review processes as provided for by Article 124 of Directive 2006/48/EC and Article 248 of Directive 2009/138/EC. They shall issue specific common guidelines for the application of this Article to participations of the financial conglomerate, in cases where national company law provisions obstruct the application of Article 14(2) of this Directive.
Article 9a Role of the Joint Committee
The Joint Committee shall, in accordance with Article 56 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively, ensure coherent cross-sectoral and cross-border supervision and compliance with Union legislation.
Article 10 Competent authority responsible for exercising supplementary supervision (the coordinator)
1. In order to ensure adequate supplementary supervision of the regulated entities in a financial conglomerate, a single coordinator, responsible for coordination and exercise of supplementary supervision, shall be appointed from among the competent authorities of the Member States concerned, including those of the Member State in which the mixed financial holding company has its head office. The identity of the coordinator shall be published on the Joint Committee's website. 2. The appointment shall be based on the following criteria: (a) where a financial conglomerate is headed by a regulated entity, the task of coordinator shall be exercised by the competent authority which has authorised that regulated entity pursuant to the relevant sectoral rules; (b) where a financial conglomerate is not headed by a regulated entity, the task of coordinator shall be exercised by the competent authority identified in accordance with the following principles: (i) where the parent of a regulated entity is a mixed financial holding company, the task of coordinator shall be exercised by the competent authority which has authorised that regulated entity pursuant to the relevant sectoral rules; (ii) where more than one regulated entity with a head office in the Community have as their parent the same mixed financial holding company, and one of these entities has been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity authorised in that Member State. Where more than one regulated entity, being active in different financial sectors, have been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity active in the most important financial sector. Where the financial conglomerate is headed by more than one mixed financial holding company with a head office in different Member States and there is a regulated entity in each of these States, the task of coordinator shall be exercised by the competent authority of the regulated entity with the largest balance sheet total if these entities are in the same financial sector, or by the competent authority of the regulated entity in the most important financial sector; (iii) where more than one regulated entity with a head office in the Community have as their parent the same mixed financial holding company and none of these entities has been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority which authorised the regulated entity with the largest balance sheet total in the most important financial sector; (iv) where the financial conglomerate is a group without a parent undertaking at the top, or in any other case, the task of coordinator shall be exercised by the competent authority which authorised the regulated entity with the largest balance sheet total in the most important financial sector. (b) where a financial conglomerate is not headed by a regulated entity, the task of coordinator shall be exercised by the competent authority identified in accordance with the following principles: (i) where the parent of a regulated entity is a mixed financial holding company, the task of coordinator shall be exercised by the competent authority which has authorised that regulated entity pursuant to the relevant sectoral rules; (ii) where more than one regulated entity with a head office in the Community have as their parent the same mixed financial holding company, and one of these entities has been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity authorised in that Member State. Where more than one regulated entity, being active in different financial sectors, have been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity active in the most important financial sector. Where the financial conglomerate is headed by more than one mixed financial holding company with a head office in different Member States and there is a regulated entity in each of these States, the task of coordinator shall be exercised by the competent authority of the regulated entity with the largest balance sheet total if these entities are in the same financial sector, or by the competent authority of the regulated entity in the most important financial sector; (ii) where more than one regulated entity with a head office in the Community have as their parent the same mixed financial holding company, and one of these entities has been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity authorised in that Member State. Where more than one regulated entity, being active in different financial sectors, have been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity active in the most important financial sector. Where the financial conglomerate is headed by more than one mixed financial holding company with a head office in different Member States and there is a regulated entity in each of these States, the task of coordinator shall be exercised by the competent authority of the regulated entity with the largest balance sheet total if these entities are in the same financial sector, or by the competent authority of the regulated entity in the most important financial sector; (iii) where more than one regulated entity with a head office in the Community have as their parent the same mixed financial holding company and none of these entities has been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority which authorised the regulated entity with the largest balance sheet total in the most important financial sector; (iv) where the financial conglomerate is a group without a parent undertaking at the top, or in any other case, the task of coordinator shall be exercised by the competent authority which authorised the regulated entity with the largest balance sheet total in the most important financial sector. 3. In particular cases, the relevant competent authorities may by common agreement waive the criteria referred to in paragraph 2 if their application would be inappropriate, taking into account the structure of the conglomerate and the relative importance of its activities in different countries, and appoint a different competent authority as coordinator. In these cases, before taking their decision, the competent authorities shall give the conglomerate an opportunity to state its opinion on that decision.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 10 Competent authority responsible for exercising supplementary supervision (the coordinator)):
1. In order to ensure adequate supplementary supervision of the regulated entities in a financial conglomerate, a single coordinator, responsible for coordination and exercise of supplementary supervision, shall be appointed from among the competent authorities of the Member States concerned, including those of the Member State in which the mixed financial holding company has its head office. The identity of the coordinator shall be published on the Joint Committee's website. 2. The appointment shall be based on the following criteria: (a) where a financial conglomerate is headed by a regulated entity, the task of coordinator shall be exercised by the competent authority which has authorised that regulated entity pursuant to the relevant sectoral rules; (b) where a financial conglomerate is not headed by a regulated entity, the task of coordinator shall be exercised by the competent authority identified in accordance with the following principles: (i) where the parent of a regulated entity is a mixed financial holding company, the task of coordinator shall be exercised by the competent authority which has authorised that regulated entity pursuant to the relevant sectoral rules; (ii) where at least two regulated entities which have their registered office in the Union have as their parent the same mixed financial holding company, and one of those entities has been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity authorised in that Member State. Where more than one regulated entity, being active in different financial sectors, have been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity active in the most important financial sector. Where the financial conglomerate is headed by more than one mixed financial holding company with a head office in different Member States and there is a regulated entity in each of these States, the task of coordinator shall be exercised by the competent authority of the regulated entity with the largest balance sheet total if these entities are in the same financial sector, or by the competent authority of the regulated entity in the most important financial sector; (iii) where at least two regulated entities which have their registered office in the Union have as their parent the same mixed financial holding company and none of those entities has been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority which authorised the regulated entity with the largest balance sheet total in the most important financial sector; (iv) where the financial conglomerate is a group without a parent undertaking at the top, or in any other case, the task of coordinator shall be exercised by the competent authority which authorised the regulated entity with the largest balance sheet total in the most important financial sector. (b) where a financial conglomerate is not headed by a regulated entity, the task of coordinator shall be exercised by the competent authority identified in accordance with the following principles: (i) where the parent of a regulated entity is a mixed financial holding company, the task of coordinator shall be exercised by the competent authority which has authorised that regulated entity pursuant to the relevant sectoral rules; (ii) where at least two regulated entities which have their registered office in the Union have as their parent the same mixed financial holding company, and one of those entities has been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity authorised in that Member State. Where more than one regulated entity, being active in different financial sectors, have been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity active in the most important financial sector. Where the financial conglomerate is headed by more than one mixed financial holding company with a head office in different Member States and there is a regulated entity in each of these States, the task of coordinator shall be exercised by the competent authority of the regulated entity with the largest balance sheet total if these entities are in the same financial sector, or by the competent authority of the regulated entity in the most important financial sector; (ii) where at least two regulated entities which have their registered office in the Union have as their parent the same mixed financial holding company, and one of those entities has been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity authorised in that Member State. Where more than one regulated entity, being active in different financial sectors, have been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority of the regulated entity active in the most important financial sector. Where the financial conglomerate is headed by more than one mixed financial holding company with a head office in different Member States and there is a regulated entity in each of these States, the task of coordinator shall be exercised by the competent authority of the regulated entity with the largest balance sheet total if these entities are in the same financial sector, or by the competent authority of the regulated entity in the most important financial sector; (iii) where at least two regulated entities which have their registered office in the Union have as their parent the same mixed financial holding company and none of those entities has been authorised in the Member State in which the mixed financial holding company has its head office, the task of coordinator shall be exercised by the competent authority which authorised the regulated entity with the largest balance sheet total in the most important financial sector; (iv) where the financial conglomerate is a group without a parent undertaking at the top, or in any other case, the task of coordinator shall be exercised by the competent authority which authorised the regulated entity with the largest balance sheet total in the most important financial sector. 3. In particular cases, the relevant competent authorities may by common agreement waive the criteria referred to in paragraph 2 if their application would be inappropriate, taking into account the structure of the conglomerate and the relative importance of its activities in different countries, and appoint a different competent authority as coordinator. In these cases, before taking their decision, the competent authorities shall give the conglomerate an opportunity to state its opinion on that decision.
Article 11 Tasks of the coordinator
1. The tasks to be carried out by the coordinator with regard to supplementary supervision shall include: (a) coordination of the gathering and dissemination of relevant or essential information in going concern and emergency situations, including the dissemination of information which is of importance for a competent authority's supervisory task under sectoral rules; (b) supervisory overview and assessment of the financial situation of a financial conglomerate; (c) assessment of compliance with the rules on capital adequacy and of risk concentration and intra-group transactions as set out in Articles 6, 7 and 8; (d) assessment of the financial conglomerate's structure, organisation and internal control system as set out in Article 9; (e) planning and coordination of supervisory activities in going concern as well as in emergency situations, in cooperation with the relevant competent authorities involved; (f) other tasks, measures and decisions assigned to the coordinator by this Directive or deriving from the application of this Directive. In order to facilitate and establish supplementary supervision on a broad legal basis, the coordinator, and the other relevant competent authorities, and, where necessary, the other competent authorities concerned, shall have coordination arrangements in place. The coordination arrangements may entrust additional tasks to the coordinator and may specify the procedures for the decision-making process among the relevant competent authorities as referred to in Articles 3 and 4, Article 5(4), Article 6, Article 12(2) and Articles 16 and 18, and for cooperation with other competent authorities. In accordance with Article 8 and the procedure set out in Article 56 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively, the ESA, through the Joint Committee, shall develop guidelines aimed at the convergence of supervisory practices with regard to the consistency of supervisory coordination arrangements in accordance with Article 131a of Directive 2006/48/EC and Article 248(4) of Directive 2009/138/EC. 2. The coordinator should, when it needs information which has already been given to another competent authority in accordance with the sectoral rules, contact this authority whenever possible in order to prevent duplication of reporting to the various authorities involved in supervision. 3. Without prejudice to the possibility of delegating specific supervisory competences and responsibilities as provided for by Community legislation, the presence of a coordinator entrusted with specific tasks concerning the supplementary supervision of regulated entities in a financial conglomerate shall not affect the tasks and responsibilities of the competent authorities as provided for by the sectoral rules.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 11 Tasks of the coordinator):
1. The tasks to be carried out by the coordinator with regard to supplementary supervision shall include: (a) coordination of the gathering and dissemination of relevant or essential information in going concern and emergency situations, including the dissemination of information which is of importance for a competent authority's supervisory task under sectoral rules; (b) supervisory overview and assessment of the financial situation of a financial conglomerate; (c) assessment of compliance with the rules on capital adequacy and of risk concentration and intra-group transactions as set out in Articles 6, 7 and 8; (d) assessment of the financial conglomerate's structure, organisation and internal control system as set out in Article 9; (e) planning and coordination of supervisory activities in going concern as well as in emergency situations, in cooperation with the relevant competent authorities involved; (f) other tasks, measures and decisions assigned to the coordinator by this Directive or deriving from the application of this Directive. In order to facilitate and establish supplementary supervision on a broad legal basis, the coordinator, and the other relevant competent authorities, and, where necessary, the other competent authorities concerned, shall have coordination arrangements in place. The coordination arrangements may entrust additional tasks to the coordinator and may specify the procedures for the decision-making process among the relevant competent authorities as referred to in Articles 3 and 4, Article 5(4), Article 6, Article 12(2) and Articles 16 and 18, and for cooperation with other competent authorities. In accordance with Article 8 and the procedure set out in Article 56 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively, the ESA, through the Joint Committee, shall develop guidelines aimed at the convergence of supervisory practices with regard to the consistency of supervisory coordination arrangements in accordance with Article 131a of Directive 2006/48/EC and Article 248(4) of Directive 2009/138/EC. 2. The coordinator should, when it needs information which has already been given to another competent authority in accordance with the sectoral rules, contact this authority whenever possible in order to prevent duplication of reporting to the various authorities involved in supervision. 3. Without prejudice to the possibility of delegating specific supervisory competences and responsibilities as provided for by Union legislative acts, the presence of a coordinator entrusted with specific tasks concerning the supplementary supervision of regulated entities in a financial conglomerate shall not affect the tasks and responsibilities of the competent authorities as provided for by the sectoral rules. 4. The required cooperation under this Section and the exercise of the tasks listed in paragraphs 1, 2 and 3 of this Article and in Article 12 and, subject to confidentiality requirements and Union law, the appropriate coordination and cooperation with relevant third-country supervisory authorities where appropriate, shall be fulfilled through colleges, established pursuant to Article 131a of Directive 2006/48/EC or Article 248(2) of Directive 2009/138/EC. The coordination arrangements referred to in the second subparagraph of paragraph 1 shall be separately reflected in the written coordination arrangements in place pursuant to Article 131 of Directive 2006/48/EC or Article 248 of Directive 2009/138/EC. The coordinator, as Chair of a college established pursuant to Article 131a of Directive 2006/48/EC or Article 248(2) of Directive 2009/138/EC, shall decide which other competent authorities participate in a meeting or in any activity of that college.
Article 12 Cooperation and exchange of information between competent authorities
1. The competent authorities responsible for the supervision of regulated entities in a financial conglomerate and the competent authority appointed as the coordinator for that financial conglomerate shall cooperate closely with each other. Without prejudice to their respective responsibilities as defined under sectoral rules, these authorities, whether or not established in the same Member State, shall provide one another with any information which is essential or relevant for the exercise of the other authorities' supervisory tasks under the sectoral rules and this Directive. In this regard, the competent authorities and the coordinator shall communicate on request all relevant information and shall communicate on their own initiative all essential information. This cooperation shall at least provide for the gathering and the exchange of information with regard to the following items: (a) identification of the group structure of all major entities belonging to the financial conglomerate, as well as of the competent authorities of the regulated entities in the group; (b) the financial conglomerate's strategic policies; (c) the financial situation of the financial conglomerate, in particular on capital adequacy, intra-group transactions, risk concentration and profitability; (d) the financial conglomerate's major shareholders and management; (e) the organisation, risk management and internal control systems at financial conglomerate level; (f) procedures for the collection of information from the entities in a financial conglomerate, and the verification of that information; (g) adverse developments in regulated entities or in other entities of the financial conglomerate which could seriously affect the regulated entities; (h) major sanctions and exceptional measures taken by competent authorities in accordance with sectoral rules or this Directive. The competent authorities may also exchange with the following authorities such information as may be needed for the performance of their respective tasks, regarding regulated entities in a financial conglomerate, in line with the provisions laid down in the sectoral rules: central banks, the European System of Central Banks, the European Central Bank and the European Systemic Risk Board in accordance with Article 15 of Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board ( 20 ). 2. Without prejudice to their respective responsibilities as defined under sectoral rules, the competent authorities concerned shall, prior to their decision, consult each other with regard to the following items, where these decisions are of importance for other competent authorities' supervisory tasks: (a) changes in the shareholder, organisational or management structure of regulated entities in a financial conglomerate, which require the approval or authorisation of competent authorities; (b) major sanctions or exceptional measures taken by competent authorities. A competent authority may decide not to consult in cases of urgency or where such consultation may jeopardise the effectiveness of the decisions. In this case, the competent authority shall, without delay, inform the other competent authorities. 3. The coordinator may invite the competent authorities of the Member State in which a parent undertaking has its head office, and which do not themselves exercise the supplementary supervision pursuant to Article 10, to ask the parent undertaking for any information which would be relevant for the exercise of its coordination tasks as laid down in Article 11, and to transmit that information to the coordinator. Where the information referred to in Article 14(2) has already been given to a competent authority in accordance with sectoral rules, the competent authorities responsible for exercising supplementary supervision may apply to the first-mentioned authority to obtain the information. 4. Member States shall authorise the exchange of the information between their competent authorities and between their competent authorities and other authorities, as referred to in paragraphs 1, 2 and 3. The collection or possession of information with regard to an entity within a financial conglomerate which is not a regulated entity shall not in any way imply that the competent authorities are required to play a supervisory role in relation to these entities on a stand-alone basis. Information received in the framework of supplementary supervision, and in particular any exchange of information between competent authorities and between competent authorities and other authorities which is provided for in this Directive, shall be subject to the provisions on professional secrecy and communication of confidential information laid down in the sectoral rules.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 12 Cooperation and exchange of information between competent authorities):
1. The competent authorities responsible for the supervision of regulated entities in a financial conglomerate and the competent authority appointed as the coordinator for that financial conglomerate shall cooperate closely with each other. Without prejudice to their respective responsibilities as defined under sectoral rules, these authorities, whether or not established in the same Member State, shall provide one another with any information which is essential or relevant for the exercise of the other authorities' supervisory tasks under the sectoral rules and this Directive. In this regard, the competent authorities and the coordinator shall communicate on request all relevant information and shall communicate on their own initiative all essential information. This cooperation shall at least provide for the gathering and the exchange of information with regard to the following items: (a) identification of the group’s legal structure and the governance and organisational structure, including all regulated entities, non-regulated subsidiaries and significant branches belonging to the financial conglomerate, the holders of qualifying holdings at the ultimate parent level, as well as of the competent authorities of the regulated entities in the group; (b) the financial conglomerate's strategic policies; (c) the financial situation of the financial conglomerate, in particular on capital adequacy, intra-group transactions, risk concentration and profitability; (d) the financial conglomerate's major shareholders and management; (e) the organisation, risk management and internal control systems at financial conglomerate level; (f) procedures for the collection of information from the entities in a financial conglomerate, and the verification of that information; (g) adverse developments in regulated entities or in other entities of the financial conglomerate which could seriously affect the regulated entities; (h) major sanctions and exceptional measures taken by competent authorities in accordance with sectoral rules or this Directive. The competent authorities may also exchange with the following authorities such information as may be needed for the performance of their respective tasks, regarding regulated entities in a financial conglomerate, in line with the provisions laid down in the sectoral rules: central banks, the European System of Central Banks, the European Central Bank and the European Systemic Risk Board in accordance with Article 15 of Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board ( 28 ). 2. Without prejudice to their respective responsibilities as defined under sectoral rules, the competent authorities concerned shall, prior to their decision, consult each other with regard to the following items, where these decisions are of importance for other competent authorities' supervisory tasks: (a) changes in the shareholder, organisational or management structure of regulated entities in a financial conglomerate, which require the approval or authorisation of competent authorities; (b) major sanctions or exceptional measures taken by competent authorities. A competent authority may decide not to consult in cases of urgency or where such consultation may jeopardise the effectiveness of the decisions. In this case, the competent authority shall, without delay, inform the other competent authorities. 3. The coordinator may invite the competent authorities of the Member State in which a parent undertaking has its head office, and which do not themselves exercise the supplementary supervision pursuant to Article 10, to ask the parent undertaking for any information which would be relevant for the exercise of its coordination tasks as laid down in Article 11, and to transmit that information to the coordinator. Where the information referred to in Article 14(2) has already been given to a competent authority in accordance with sectoral rules, the competent authorities responsible for exercising supplementary supervision may apply to the first-mentioned authority to obtain the information. 4. Member States shall authorise the exchange of the information between their competent authorities and between their competent authorities and other authorities, as referred to in paragraphs 1, 2 and 3. The collection or possession of information with regard to an entity within a financial conglomerate which is not a regulated entity shall not in any way imply that the competent authorities are required to play a supervisory role in relation to these entities on a stand-alone basis. Information received in the framework of supplementary supervision, and in particular any exchange of information between competent authorities and between competent authorities and other authorities which is provided for in this Directive, shall be subject to the provisions on professional secrecy and communication of confidential information laid down in the sectoral rules.
Article 12a Cooperation and exchange of information with the Joint Committee
1. The competent authorities shall cooperate with the Joint Committee for the purposes of this Directive, in accordance with Regulation (EU) No 1093/2010, Regulation (EU) No 1094/2010, and Regulation (EU) No 1095/2010. 2. The competent authorities shall without delay provide the Joint Committee with all information necessary to carry out its duties in accordance with Article 35 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/2010 respectively.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 12a Cooperation and exchange of information with the Joint Committee):
1. The competent authorities shall cooperate with the Joint Committee for the purposes of this Directive, in accordance with Regulation (EU) No 1093/2010, Regulation (EU) No 1094/2010, and Regulation (EU) No 1095/2010. 2. The competent authorities shall without delay provide the Joint Committee with all information necessary to carry out its duties in accordance with Article 35 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/2010 respectively. 3. The coordinators shall provide the Joint Committee with the information referred to in Article 9(4) and point (a) of the second subparagraph of Article 12(1). The Joint Committee shall make available to the competent authorities information regarding the legal structure and the governance and organisational structure of financial conglomerates.
Article 13 Management body of mixed financial holding companies
Member States shall require that persons who effectively direct the business of a mixed financial holding company are of sufficiently good repute and have sufficient experience to perform those duties.
Article 14 Access to information
1. Member States shall ensure that there are no legal impediments within their jurisdiction preventing the natural and legal persons included within the scope of supplementary supervision, whether or not a regulated entity, from exchanging with each other any information which would be relevant for the purposes of supplementary supervision and from exchanging information in accordance with this Directive and with the ESA in accordance with Article 35 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively, where necessary through the Joint Committee. 2. Member States shall provide that, when approaching the entities in a financial conglomerate, whether or not a regulated entity, either directly or indirectly, their competent authorities responsible for exercising supplementary supervision shall have access to any information which would be relevant for the purposes of supplementary supervision.
Article 15 Verification
Where, in applying this Directive, competent authorities wish in specific cases to verify the information concerning an entity, whether or not regulated, which is part of a financial conglomerate and is situated in another Member State, they shall ask the competent authorities of that other Member State to have the verification carried out. The authorities which receive such a request shall, within the framework of their competences, act upon it either by carrying out the verification themselves, by allowing an auditor or expert to carry it out, or by allowing the authority which made the request to carry it out itself. The competent authority which made the request may, if it so wishes, participate in the verification when it does not carry out the verification itself.
Article 16 Enforcement measures
If the regulated entities in a financial conglomerate do not comply with the requirements referred to in Articles 6 to 9 or where the requirements are met but solvency may nevertheless be jeopardised or where the intra-group transactions or the risk concentrations are a threat to the regulated entities' financial position, the necessary measures shall be required in order to rectify the situation as soon as possible: — by the coordinator with respect to the mixed financial holding company, — by the competent authorities with respect to the regulated entities; to that end, the coordinator shall inform those competent authorities of its findings. Without prejudice to Article 17(2), Member States may determine what measures may be taken by the competent authorities with respect to mixed financial holding companies. In accordance with Articles 16 and 56 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively, the ESA, through the Joint Committee, may develop guidelines for measures in relation to mixed financial holding companies. The competent authorities involved, including the coordinator, shall where appropriate coordinate their supervisory actions.
Article 17 Additional powers of the competent authorities
1. Pending further harmonisation between sectoral rules, the Member States shall provide that their competent authorities shall have the power to take any supervisory measure deemed necessary in order to avoid or to deal with the circumvention of sectoral rules by regulated entities in a financial conglomerate. 2. Without prejudice to their criminal law provisions, Member States shall ensure that penalties or measures aimed at ending observed breaches or the causes of such breaches may be imposed on mixed financial holding companies, or their effective managers, which 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 cooperate closely to ensure that such penalties or measures produce the desired results.
Article 18 Parent undertakings outside the Community
1. Without prejudice to the sectoral rules, where Article 5(3) applies, the competent authorities shall verify whether the regulated entities, the parent undertaking of which has its head office in a third country are subject to supervision by that third country's competent authority, which is equivalent to that provided for by this Directive on the supplementary supervision of regulated entities referred to in Article 5(2). The verification shall be carried out by the competent authority which would be the coordinator if the criteria set out in Article 10(2) were to apply, on the request of the parent undertaking or of any of the regulated entities authorised in the Union or on its own initiative. That competent authority shall consult the other relevant competent authorities, and shall make every effort to comply with any applicable guidelines prepared through the Joint Committee in accordance with Articles 16 and 56 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively. 1a. Where a competent authority disagrees with the decision taken by another relevant competent authority under paragraph 1, Article 19 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively shall apply. 2. In the absence of equivalent supervision referred to in paragraph 1, Member States shall apply to the regulated entities, by analogy, the provisions concerning the supplementary supervision of regulated entities referred to in Article 5(2). As an alternative, competent authorities may apply one of the methods set out in paragraph 3. 3. Member States shall allow their competent authorities to apply other methods which ensure appropriate supplementary supervision of the regulated entities in a financial conglomerate. These methods must be agreed by the coordinator, after consultation with the other relevant competent authorities. The competent authorities may in particular require the establishment of a mixed financial holding company which has its head office in the Community, and apply this Directive to the regulated entities in the financial conglomerate headed by that holding company. The methods must achieve the objectives of the supplementary supervision as defined in this Directive and must be notified to the other competent authorities involved and the Commission.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 18 Parent undertakings in a third country):
1. Without prejudice to the sectoral rules, where Article 5(3) applies, the competent authorities shall verify whether the regulated entities, the parent undertaking of which has its head office in a third country are subject to supervision by that third country's competent authority, which is equivalent to that provided for by this Directive on the supplementary supervision of regulated entities referred to in Article 5(2). The verification shall be carried out by the competent authority which would be the coordinator if the criteria set out in Article 10(2) were to apply, on the request of the parent undertaking or of any of the regulated entities authorised in the Union or on its own initiative. That competent authority shall consult the other relevant competent authorities, and shall make every effort to comply with any applicable guidelines prepared through the Joint Committee in accordance with Articles 16 and 56 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively. 1a. Where a competent authority disagrees with the decision taken by another relevant competent authority under paragraph 1, Article 19 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively shall apply. 2. In the absence of equivalent supervision referred to in paragraph 1, Member States shall apply to the regulated entities, by analogy, the provisions concerning the supplementary supervision of regulated entities referred to in Article 5(2). As an alternative, competent authorities may apply one of the methods set out in paragraph 3. 3. Competent authorities may apply other methods which ensure appropriate supplementary supervision of the regulated entities in a financial conglomerate. Those methods shall be agreed by the coordinator, after consulting the other relevant competent authorities. The competent authorities may in particular require the establishment of a mixed financial holding company which has its head office in the Union, and apply this Directive to the regulated entities in the financial conglomerate headed by that holding company. The competent authorities shall ensure that those methods achieve the objective of supplementary supervision under this Directive and shall notify the other competent authorities involved and the Commission thereof.
Article 19 Cooperation with third-country competent authorities
1. Article 25(1) and (2) of Directive 2000/12/EC and Article 10a of Directive 98/78/EC shall apply mutatis mutandis to the negotiation of agreements with one or more third countries regarding the means of exercising supplementary supervision of regulated entities in a financial conglomerate. 2. Without prejudice to Article 218(1) and (2) of the Treaty on the Functioning of the European Union (TFEU), the Commission shall, with the assistance of the Joint Committee, the European Banking Committee, the European Insurance and Occupational Pensions Committee and the Financial Conglomerates Committee, examine the outcome of the negotiations referred to in paragraph 1 and the resulting situation.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 19 Cooperation with third-country competent authorities):
Article 39(1) and (2) of Directive 2006/48/EC, Article 10a of Directive 98/78/EC and Article 264 of Directive 2009/138/EC shall apply mutatis mutandis to the negotiation of agreements with one or more third countries regarding the means of exercising supplementary supervision of regulated entities in a financial conglomerate.
Article 20 Powers conferred on the Commission
1. The Commission shall adopt the technical adaptations to be made to this Directive in the following areas: (a) a more precise formulation of the definitions referred to in Article 2 in order to take account of developments in financial markets in the application of this Directive; (b) a more precise formulation of the definitions referred to in Article 2 in order to ensure uniform application of this Directive in the Community; (c) the alignment of terminology and the framing of definitions in the Directive in accordance with subsequent Community acts on regulated entities and related matters; (d) a more precise definition of the calculation methods set out in Annex I in order to take account of developments on financial markets and prudential techniques; (e) coordination of the provisions adopted pursuant to Articles 7 and 8 and Annex II with a view to encouraging uniform application within the Community. Those measures, designed to amend non-essential elements of this Directive, inter alia , by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 21(2). Those measures shall not include the subject matter of the power delegated and conferred on the Commission with regard to the items listed in Article 21a. 2. The Commission shall inform the public of any proposal presented in accordance with this Article and will consult interested parties prior to submitting the draft measures to the Financial Conglomerates Committee referred to in Article 21.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 20 Powers conferred on the Commission):
The Commission shall be empowered to adopt delegated acts in accordance with Article 21c concerning the technical adaptations to be made to this Directive in the following areas: (a) a more precise formulation of the definitions laid down in Article 2 in order to take account of developments in financial markets for the application of this Directive; (b) the alignment of terminology and the framing of definitions in this Directive in accordance with subsequent Union acts on regulated entities and related matters; (c) a more precise definition of the calculation methods set out in Annex I in order to take account of developments on financial markets and prudential techniques. Those measures shall not include the subject matter of the power delegated to and conferred on the Commission with regard to the items listed in Article 21a.
Article 21 Committee
1. The Commission shall be assisted by a Financial Conglomerates Committee, hereinafter referred to as the ‘Committee’. 2. Where reference is made to this paragraph, Article 5a(1) to (4) and Article 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof. 3. By 31 December 2010, and, thereafter, at least every three years, the Commission shall review the provisions concerning its implementing powers and present a report to the European Parliament and to the Council on the functioning of those powers. The report shall examine, in particular, the need for the Commission to propose amendments to this Directive in order to ensure the appropriate scope of the implementing powers conferred on the Commission. The conclusion as to whether or not amendment is necessary shall be accompanied by a detailed statement of reasons. If necessary, the report shall be accompanied by a legislative proposal to amend the provisions conferring implementing powers on the Commission. 4. The ESA, through the Joint Committee, may provide general guidelines as to whether the supplementary supervision arrangements of competent authorities in third countries are likely to achieve the objectives of the supplementary supervision as defined in this Directive, in relation to the regulated entities in a financial conglomerate, the head of which has its head office in a third country. The Joint Committee shall keep any such guidelines under review and take into account any changes to the supplementary supervision carried out by such competent authorities. 5. By 1 December 2011 the Commission shall review Article 20 and present any appropriate legislative proposals in order to allow the full application of delegated acts under Article 290 TFEU and implementing acts under Article 291 TFEU in respect of this Directive. Without prejudice to implementing measures already adopted, the powers conferred on the Commission in Article 21 to adopt implementing measures that remain after the entry into force of the Lisbon Treaty, shall cease to apply on 1 December 2012.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 21 Committee):
1. The Commission shall be assisted by a Financial Conglomerates Committee, hereinafter referred to as the ‘Committee’. 4. The ESA, through the Joint Committee, may provide general guidelines as to whether the supplementary supervision arrangements of competent authorities in third countries are likely to achieve the objectives of the supplementary supervision as defined in this Directive, in relation to the regulated entities in a financial conglomerate, the head of which has its head office in a third country. The Joint Committee shall keep any such guidelines under review and take into account any changes to the supplementary supervision carried out by such competent authorities. 6. The Committee shall be kept informed by Member States of the principles they apply concerning the supervision of intra-group transactions and risk concentration.
Article 21a Technical standards
1. In order to ensure consistent harmonisation of this Directive, the ESA, in accordance with Article 56 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/2010 respectively may develop draft regulatory technical standards with regard to: (a) Article 2(11) in order to specify the application of Article 17 of Council Directive 78/660/EEC in the context of this Directive; (b) Article 2(17) in order to establish procedures or specify criteria for the determination of ‘relevant competent authorities’; (c) Article 3(5) in order to specify the alternative parameters for the identification of a financial conglomerate. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/2010 respectively. 2. In order to ensure uniform conditions of application of this Directive, the ESA, in accordance with Articles 56 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/2010 respectively may develop draft implementing technical standards with regard to: (a) Article 6(2) in order to ensure uniform conditions of application of the calculation methods listed in Annex I part II, but without prejudice to Article 6(4); (b) Article 7(2) in order to ensure uniform conditions of application of the procedures for including the items within the scope of the definition of ‘risk concentrations’ in the supervisory overview referred to in the second subparagraph of Article 7(2); (c) Article 8(2) in order to ensure uniform conditions of application of the procedures for including the items within the scope of the definition of ‘intra group transactions’ in the supervisory overview referred to in the third subparagraph of Article 8(2). Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/2010 respectively.
Amendment rationale: CONTEXT OF THE PROPOSAL About 20 years ago, financial groups with business models that combine the provision of services and products in different sectors of financial markets began to develop. These became known as financial conglomerates. Conglomerates may include banks, insurance undertakings, investment firms and possibly asset management companies. For several years, different expert groups at international and European level discussed how to supervise such conglomerates appropriately. This resulted in the Joint Forum's[1] 'Principles for the supervision of financial conglomerates' in 1999[2]. Against this background, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002[3] ('FICOD') introduced group-wide supplementary supervision. The objective of this supplementary supervision was to control potential risks arising from double gearing (i.e. multiple use of capital) and so-called group risks, that is the risks of contagion, management complexity, concentration, and conflicts of interest, which could arise when several licenses for different financial services are combined. Whilst the banking and insurance directives aim at calculating sufficient capital buffers for the protection of customers and policyholders, FICOD, regulates the supplementary supervision of group risks. This implies that financial entities which have a mutual relationship that affects the risk profiles of both of them must be included in the supervisory scope. In this way, FICOD supplements the sectoral directives, the Banking Directive 2006/48/EC[4] ('CRD') and various insurance directives, all of which can be applied on a solo level, per licensed entity, and on a consolidated level, where all licensed legal entities subject to the same directive are aggregated. A review of FICOD was envisaged some years after its implementation. The revision of the 1988 Basel Accord in 2004, the European implementation into the CRD in 2006, and the introduction of a comprehensive set of new rules for insurance companies in Solvency II[5] reflect recent developments, as far as legal entities of a group are active in the same sector, banking or insurance. Until Solvency II is implemented, the FICOD supplements the insurance directives presently in place, especially the Insurance Group Directive[6] ('IGD'). The Commission intends to proceed in two steps. With the present proposal, the most urgent technical issues identified during the review, as analysed by the Joint Committee on Financial Conglomerates[7] ('JCFC'), are addressed, including the technical issues detected in earlier review exercises. Calls for advice and a consultation were issued to assess the impact of these potential changes[8]. Later in 2010, a more fundamental debate will take place in the context of G20 developments regarding supplementary supervision. This debate is likely to focus on supervisory scope and capital related issues.
Revised version (Article 21a Technical standards):
1. In order to ensure consistent harmonisation of this Directive, the ESA, in accordance with Article 56 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/2010 respectively may develop draft regulatory technical standards with regard to: (a) Article 2(11) in order to specify the application of Article 17 of Council Directive 78/660/EEC in the context of this Directive; (b) Article 2(17) in order to establish procedures or specify criteria for the determination of ‘relevant competent authorities’; (c) Article 3(5) in order to specify the alternative parameters for the identification of a financial conglomerate; (d) Article 6(2) in order to ensure a uniform format (with instructions) for, and determine the frequency of and, where appropriate, the dates for reporting. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/2010 respectively. 1a. In order to ensure consistent application of Articles 2, 7 and 8 and Annex II, the ESA shall, through the Joint Committee, develop draft regulatory technical standards to establish a more precise formulation of the definitions set out in Article 2 and to coordinate the provisions adopted pursuant to Articles 7 and 8 and Annex II. The Joint Committee shall submit those draft regulatory technical standards to the Commission by 1 January 2015. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively. 2. In order to ensure uniform conditions of application of this Directive, the ESA, in accordance with Articles 56 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/2010 respectively may develop draft implementing technical standards with regard to: (a) Article 6(2) in order to ensure uniform conditions of application of the calculation methods listed in Annex I part II, but without prejudice to Article 6(4); (b) Article 7(2) in order to ensure uniform conditions of application of the procedures for including the items within the scope of the definition of ‘risk concentrations’ in the supervisory overview referred to in the second subparagraph of Article 7(2); (c) Article 8(2) in order to ensure uniform conditions of application of the procedures for including the items within the scope of the definition of ‘intra group transactions’ in the supervisory overview referred to in the third subparagraph of Article 8(2). Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/2010 respectively. 3. Within two years of the adoption of any implementing technical standards in accordance with paragraph 2(a), Member States shall require a uniform format for and shall determine the frequency of, and the dates for, reporting of the calculations referred to in this Article.
Article 22 Amendments to Directive 73/239/EEC
Directive 73/239/EEC is amended as follows: 1. the following Article shall be inserted: 
‘Article 12a
1. The competent authorities of the other Member State involved shall be consulted prior to the granting of an authorisation to an insurance undertaking, which is:
(a) a subsidiary of an insurance undertaking authorised in another Member State; or
(a) a subsidiary of an insurance undertaking authorised in another Member State; or
(b) a subsidiary of the parent undertaking of an insurance undertaking authorised in another Member State; or
(b) a subsidiary of the parent undertaking of an insurance undertaking authorised in another Member State; or
(c) controlled by the same person, whether natural or legal, who controls an insurance undertaking authorised in another Member State.
(c) controlled by the same person, whether natural or legal, who controls an insurance undertaking authorised in another Member State.
2. The competent authority of a Member State involved responsible for the supervision of credit institutions or investment firms shall be consulted prior to the granting of an authorisation to an insurance undertaking which is:
(a) a subsidiary of a credit institution or investment firm authorised in the Community; or
(a) a subsidiary of a credit institution or investment firm authorised in the Community; or
(b) a subsidiary of the parent undertaking of a credit institution or investment firm authorised in the Community; or
(b) a subsidiary of the parent undertaking of a credit institution or investment firm authorised in the Community; or
(c) controlled by the same person, whether natural or legal, who controls a credit institution or investment firm authorised in the Community.
(c) controlled by the same person, whether natural or legal, who controls a credit institution or investment firm authorised in the Community.
3. The relevant competent authorities referred to in paragraphs 1 and 2 shall in particular consult each other when assessing the suitability of the shareholders and the reputation and experience of directors involved in the management of another entity of the same group. They shall inform each other of any information regarding the suitability of shareholders and the reputation and experience of directors which is of relevance to the other competent authorities involved for the granting of an authorisation as well as for the ongoing assessment of compliance with operating conditions.’ 2. the following subparagraphs shall be added to Article 16(2): ‘The available solvency margin shall also be reduced by the following items: (a) participations which the insurance undertaking holds in — insurance undertakings within the meaning of Article 6 of this Directive, Article 6 of First Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance ( 21 ), or Article 1(b) of Directive 98/78/EC of the European Parliament and of the Council ( 22 ), — reinsurance undertakings within the meaning of Article 1(c) of Directive 98/78/EC, — insurance holding companies within the meaning of Article 1(i) of Directive 98/78/EC, — credit institutions and financial institutions within the meaning of Article 1(1) and (5) of Directive 2000/12/EC of the European Parliament and of the Council ( 23 ), — investment firms and financial institutions within the meaning of Article 1(2) of Directive 93/22/EEC ( 24 ) and of Article 2(4) and (7) of Directive 93/6/EEC ( 25 ); (b) each of the following items which the insurance undertaking holds in respect of the entities defined in (a) in which it holds a participation: — instruments referred to in paragraph 3, — instruments referred to in Article 18(3) of Directive 79/267/EEC, — subordinated claims and instruments referred to in Article 35 and Article 36(3) of Directive 2000/12/EC. Where shares in another credit institution, investment firm, financial institution, insurance or reinsurance undertaking or insurance holding company are held temporarily for the purposes of a financial assistance operation designed to reorganise and save that entity, the competent authority may waive the provisions on deduction referred to under (a) and (b) of the fourth subparagraph. As an alternative to the deduction of the items referred to in (a) and (b) of the fourth subparagraph which the insurance undertaking holds in credit institutions, investment firms and financial institutions, Member States may allow their insurance undertakings to apply mutatis mutandis methods 1, 2, or 3 of Annex I to Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate ( 26 ). Method 1 (Accounting consolidation) shall only be applied if the competent authority is confident about the level of integrated management and internal control regarding the entities which would be included in the scope of consolidation. The method chosen shall be applied in a consistent manner overtime. Member States may provide that, for the calculation of the solvency margin as provided for by this Directive, insurance undertakings subject to supplementary supervision in accordance with Directive 98/78/EC or to supplementary supervision in accordance with Directive 2002/87/EC, need not deduct the items referred to in (a) and (b) of the fourth subparagraph which are held in credit institutions, investment firms, financial institutions, insurance or reinsurance undertakings or insurance holding companies which are included in the supplementary supervision. For the purposes of the deduction of participations referred to in this paragraph, participation shall mean a participation within the meaning of Article 1(f) of Directive 98/78/EC. 2. the following subparagraphs shall be added to Article 16(2): ‘The available solvency margin shall also be reduced by the following items: (a) participations which the insurance undertaking holds in — insurance undertakings within the meaning of Article 6 of this Directive, Article 6 of First Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance ( 21 ), or Article 1(b) of Directive 98/78/EC of the European Parliament and of the Council ( 22 ), — reinsurance undertakings within the meaning of Article 1(c) of Directive 98/78/EC, — insurance holding companies within the meaning of Article 1(i) of Directive 98/78/EC, — credit institutions and financial institutions within the meaning of Article 1(1) and (5) of Directive 2000/12/EC of the European Parliament and of the Council ( 23 ), — investment firms and financial institutions within the meaning of Article 1(2) of Directive 93/22/EEC ( 24 ) and of Article 2(4) and (7) of Directive 93/6/EEC ( 25 ); (a) participations which the insurance undertaking holds in — insurance undertakings within the meaning of Article 6 of this Directive, Article 6 of First Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance ( 21 ), or Article 1(b) of Directive 98/78/EC of the European Parliament and of the Council ( 22 ), — reinsurance undertakings within the meaning of Article 1(c) of Directive 98/78/EC, — insurance holding companies within the meaning of Article 1(i) of Directive 98/78/EC, — credit institutions and financial institutions within the meaning of Article 1(1) and (5) of Directive 2000/12/EC of the European Parliament and of the Council ( 23 ), — investment firms and financial institutions within the meaning of Article 1(2) of Directive 93/22/EEC ( 24 ) and of Article 2(4) and (7) of Directive 93/6/EEC ( 25 ); (b) each of the following items which the insurance undertaking holds in respect of the entities defined in (a) in which it holds a participation: — instruments referred to in paragraph 3, — instruments referred to in Article 18(3) of Directive 79/267/EEC, — subordinated claims and instruments referred to in Article 35 and Article 36(3) of Directive 2000/12/EC. (b) each of the following items which the insurance undertaking holds in respect of the entities defined in (a) in which it holds a participation: — instruments referred to in paragraph 3, — instruments referred to in Article 18(3) of Directive 79/267/EEC, — subordinated claims and instruments referred to in Article 35 and Article 36(3) of Directive 2000/12/EC. Where shares in another credit institution, investment firm, financial institution, insurance or reinsurance undertaking or insurance holding company are held temporarily for the purposes of a financial assistance operation designed to reorganise and save that entity, the competent authority may waive the provisions on deduction referred to under (a) and (b) of the fourth subparagraph. As an alternative to the deduction of the items referred to in (a) and (b) of the fourth subparagraph which the insurance undertaking holds in credit institutions, investment firms and financial institutions, Member States may allow their insurance undertakings to apply mutatis mutandis methods 1, 2, or 3 of Annex I to Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate ( 26 ). Method 1 (Accounting consolidation) shall only be applied if the competent authority is confident about the level of integrated management and internal control regarding the entities which would be included in the scope of consolidation. The method chosen shall be applied in a consistent manner overtime. Member States may provide that, for the calculation of the solvency margin as provided for by this Directive, insurance undertakings subject to supplementary supervision in accordance with Directive 98/78/EC or to supplementary supervision in accordance with Directive 2002/87/EC, need not deduct the items referred to in (a) and (b) of the fourth subparagraph which are held in credit institutions, investment firms, financial institutions, insurance or reinsurance undertakings or insurance holding companies which are included in the supplementary supervision. For the purposes of the deduction of participations referred to in this paragraph, participation shall mean a participation within the meaning of Article 1(f) of Directive 98/78/EC.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The establishment of a European Single Access Point (ESAP) by 2024 is a flagship action of the Capital Markets Union (CMU) Action Plan adopted by the European Commission in September 2020 1 . ESAP will contribute to the achievement of the CMU’s objectives by providing EU-wide access to information published by entities that is relevant to capital markets, financial services and sustainable finance, i.e. mainly information about their economic activities and products. ESAP will provide access to this information in an efficient and non-discriminatory manner. Information about entities’ activities and products is essential for decision-making by providers of capital. ESAP will contribute to further integrating the financial services and capital markets in the single market, to allocating capital more efficiently across the EU and promoting the development of smaller national capital markets and economies by giving them greater visibility. ESAP will also allow non-listed entities including Small and Medium-Sized enterprises (SMEs) to make available information on a voluntary basis. This will facilitate their access to capital. This proposal is part of a package comprised of: · a proposal for a Regulation establishing a European Single Access Point; · a proposal for a Directive amending certain Directives (this proposal); and · a proposal for a Regulation amending certain Regulations. Amendments to certain Directives are necessary to achieve the above objectives to contribute to the integration of the single market, particularly as regards the collection of information to be made available to ESAP.