Consultation on proposed solutions to address some issues noted in the Financial Conglomerates Directive (JCFC-09-10)
Start Date: 28/05/2009 | Deadline: 28/08/2009
The Committee of European Banking Supervisors (CEBS) and the Committee of European Insurance and Occupational Penstions (CEIOPS) - through the Joint Committee on Financial Conglomerates (JCFC) are publishing today the formal consultation on its proposed advice to the European Commission (EC) on its review of the Financial Conglomerates Directive(FCD).
The European Commission issued a Call for Advice to the JCFC in April 2008 and a progress Call in February 2009, asking the JCFC to undertake a stocktake of the current national implementation practices of the FCD. The review focuses solely on how some of the provisions of the FCD have been applied and how they might be improved in the areas of definitions and terminology, scope and internal control requirements. The review is based on the current framework implemented in national legislation. Although this review acknowledges some of the recent changes to European sectoral legislation, it does not anticipate any necessary changes to the FCD resulting from these developments. The issues and recommendations in this paper should be considered in this context.
One of the major proposals from the JCFC is to propose a change to the definition of holding companies to ensure that the sectoral directives are supplemented, in the case of groups with cross-sector activities, and that this is appropriately applied, based on the risk profile of the group.
Specifically, the JCFC has identified the following four issues where the FCD may not achieve its objectives:
1. The definitions of different types of holding companies in the FCD and their impact on the scope of sectoral group supervision;
2. The definition of "financial sector" in Article 2.8 of the FCD and the application of the threshold conditions in Article 3 of the FCD;
3. Implications of different treatments of participations for the identification and scope of supplementary supervision of financial conglomerates (FCs); and
4. The treatment of ‘participations' in respect of risk concentrations (RC) and intra-group transactions (IGT) supervision and internal control mechanisms (respectively, Articles 7, 8 and 9 FCD).
The consultation paper sets out a detailed analysis of these issues, options that could address them and solutions recommended by the JCFC. The views of industry are now sought on these.
CEBS and CEIOPS, through the JCFC, will hold a joint public hearing on 8 July 2009 from 9:30–12:00 CET at CEIOPS premises in Frankfurt.
In order to allow for a focused consultation, the JCFC has developed some concrete questions on which it would be very keen to hear market participants' views. In areas where the JCFC is proposing Level 3 guidance, input is welcome for suggestions for developing such guidance.
All comments received will be published on the CEBS and CEIOPS websites.