Regulation of Credit Institutions
Credit institutions authorised in one EU state may provide services in other EU states. An institution established in one state may establish a branch in another state. The institution which wishes to provide services or establish a branch in EU another state must notify the authorities of its home state giving details of the program of operations and detailed plans.
The home state must provide this to the host state. The refusal must be justified on the grounds of the lack of capacity or the administrative structure of the credit institution. There is a right to appeal to the court.
They may use their original name provided it does not give rise to any doubt as to which national law their parent undertaking is subject. There may be a requirement for explanatory particulars such as \”branch.\”
The home state\’s regulator must ensure that all credit institutions have sound administrative and accounting procedures and adequate controls.
There are essential requirements for the taking up and authorisation of credit institutions.
- there is a requirement for separate funds with a minimum capital of €5 million;
- at least two persons of sufficient repute to direct the business of the credit institution;
- a requirement for notification of the regulator of significant shareholders, direct or indirect.
There are detailed criteria for the prudential assessment of shareholders and management in the event of an acquisition. An adjustment must be made as for the suitability and soundness of the acquirer.
Reporting of supervisory financial information
Regulation (EU) 2015/534 on reporting of supervisory financial information
Regulation (EU) 2015/534 lays down rules and procedures, as well as the format and frequency, for the reporting of supervisory financial information by supervised banks and groups of supervised banks to national competition authorities and to the European Central Bank (ECB).
In the EU, supervised banks (‘entities’) are subject to regular financial reporting requirements. Regulation (EU) 2015/534 specifies the requirements concerning the reporting of supervisory financial information by supervised entities to the national competent authorities and the ECB in the context of the Single Supervisory Mechanism (SSM), the system of financial supervision composed of the ECB and national competent authorities of participating EU countries.
The addressees of the regulation are:
significant supervised entities — banks and banking groups that, according to the SSM framework regulation, meet at least one of the following criteria and are directly supervised by the ECB:
total assets exceed €30 billion,
economically important for their country or the EU as a whole,
total assets of over €5 billion and cross-border assets and liabilities above 20%,
have requested or received funding from the European Stability Mechanism or its predecessor, the European Financial Stability Facility,
are one of a country’s three most significant banks;
less significant entities — banks and banking groups that meet none of the criteria and are supervised by their national authorities subject to ECB oversight.
National competent authorities (NCAs):
set the deadlines for the reporting of financial information by supervised entities to them;
monitor and ensure the quality and reliability of the information they submit to the ECB in a uniform technical format;
may use the data they collect under the regulation for other tasks.
Application & Background
Regulation (EU) 2015/534 has applied since 1 April 2015.
The ECB is responsible for the effective and consistent functioning of the whole system of European banking supervision, which comprises the ECB and the national banking supervisors of the participating countries. The main aims of this supervision are to:
ensure the safety and soundness of the European banking system;
increase financial integration and stability;
ensure consistent supervision.
European banking supervision is one of the two pillars of the EU banking union, along with the Single Resolution Mechanism.
The ECB oversees all significant and less significant banks in the participating countries through direct and indirect supervision.
Regulation (EU) 2015/534 of the European Central Bank of 17 March 2015 on reporting of supervisory financial information (ECB/2015/13) (OJ L 86, 31.3.2015, pp. 13-151)
Successive amendments to Regulation (EU) 2015/534 have been incorporated into the original text. This consolidated version is of documentary value only.
Regulation (EU) 2020/605 of the European Central Bank of 9 April 2020 amending Regulation (EU) 2015/534 on reporting of supervisory financial information (ECB/2020/22) (OJ L 145, 7.5.2020, pp. 1-334)
Commission Implementing Regulation (EU) No 680/2014 of 16 April 2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council (OJ L 191, 28.6.2014, pp. 1-1861)
See consolidated version.
Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014 establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities (SSM Framework Regulation) (ECB/2014/17) (OJ L 141, 14.5.2014, pp. 1-50)
Decision 2014/477/EU of the European Central Bank of 2 July 2014 on the provision to the European Central Bank of supervisory data reported to the national competent authorities by the supervised entities pursuant to Commission Implementing Regulation (EU) No 680/2014 (ECB/2014/29) (OJ L 214, 19.7.2014, pp. 34-37)
See consolidated version.
Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, pp. 63-89)
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, pp. 338-436)
See consolidated version.
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, pp. 1-337)
See consolidated version.
Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (OJ L 243, 11.9.2002, pp. 1-4)
Financial conglomerates – supervision
Directive 2002/87/EC — supervision of financial conglomerates
It seeks to enhance the effective supervision of financial conglomerates — large financial groups (banking groups, insurance groups, investment firm groups) which are active in different financial sectors, often across borders.
Its overall aim is to contribute to greater financial stability and consumer protection.
The directive sets out specific requirements:
on solvency, specifically to prevent the same capital being used more than once as a buffer against risk in different entities in the same conglomerate (‘multiple gearing of capital’) and to prevent ‘downstreaming’ by parent companies, whereby they issue debt and then use the proceeds as equity for their regulated subsidiaries (‘excessive leveraging’);
on the suitability and professionalism of the conglomerate’s management;
to ensure appropriate risk management and internal control systems within the conglomerate;
stipulating that a single supervisory authority should be appointed to coordinate the overall supervision of a conglomerate which may involve many different authorities dealing with different parts of the conglomerate’s activities;
for information sharing and cooperation among the supervisors (including those in non-EU countries) of the regulated entities in a financial conglomerate.
Directive 2011/89/EU introduced amendments giving national financial supervisors new powers to better oversee the conglomerates’ parent entities, such as holding companies. In this way, supervisors may obtain better information at an earlier stage, should a financial conglomerate run into trouble, and be better equipped to intervene.
It applies from 11 February 2003. EU countries had to incorporate it into national law by 10 August 2004.
For more information, see: ‘Financial Conglomerates’ on the European Commission’s website.
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 and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (OJ L 35, 11.2.2003, pp. 1-27)
Subsequent amendments to Directive 2002/87/EC have been incorporated into the basic text. This consolidated version is of documentary value only.
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