a) Do the rules on notification and assessment of proposed acquisitions of qualifying holdings apply to legal mergers between credit institutions? Is this assessment dependent on whether the merging entities belong to the same group or not?
b) Can a competent authority oppose a proposed acquisition, on the basis of concerns related to financial stability. More specifically, can a competent authority oppose a proposed acquisition due to lack of agreement on Memorandums of Understanding on branch supervision between the home state of the acquiring entity and the home state of the acquired entity (which will be host state following the acquisition and future integration)?
c) Can a competent authority refuse to make a decision on a proposed acquisition of a qualifying holding and thus exceed the maximum assessment period of 60 working days due to lack of agreement on Memorandums of Understanding on branch supervision between the home state of the acquiring entity and the home state of the acquired entity (which will be host state following the acquisition and future integration)?
The scope and degree of harmonization has arisen in the context of a proposed merger between a credit institution established in member state A and its wholly owned subsidiary being a credit institution established in member state B, where the operations in Member State B will be conducted through a branch of the acquiring credit institution following the merger. More specifically, the competent authorities of Member State B has stated that it will not make a decision on a proposed merger due to lack of agreement on Memorandums of Understanding on branch supervision between member state A and member state B. The position held by member state B may hinder completion of the merger as planned, and it is therefore important to clarify the interpretation of CRD Article 22 and Article 23 in line with the questions raised above.
a) A merger by absorption may trigger a qualifying holdings procedure regulated by Articles 22-27 of Directive 2013/36/EU (CRD) if:
- it entails the acquisition or further increase(*) of qualifying holdings in the absorbed institution or
- it entails the acquisition or further increase(*) of qualifying holdings in the absorbing institution,
(*) provided that the thresholds specified in Article 22(1) CRD (20%, 30% or 50%) are reached or exceeded or that the credit institution at stake would become a subsidiary of the acquirer.
b) Article 23(1) of Directive 2013/36/EU (CRD) details an exhaustive list of five criteria against which the proposed acquisition is assessed: the reputation of the proposed acquirer, the reputation and experience of the proposed new managers, the financial soundness of the acquirer, the impact on the targeted credit institution and its effective supervision and, lastly, the risk of links to money laundering or terrorist financing. In addition, Article 23(2) provides for a procedural ground for opposition: if the information provided is incomplete. These criteria are harmonised at EU level and a proposed acquisition can only be assessed against them. Additionally, these criteria mainly focus on the target credit institution and the proposed acquirer.
As mentioned by the Commission in its Report on the Application of Directive 2007/44/EC as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector (COM(2013) 64 final), financial stability as such is not explicitly stated amongst the assessment criteria, but it is implicitly addressed by the assessment criteria of financial soundness and capability of complying with prudential requirements, which both have a forward looking element.
c) Competent authorities cannot refuse to make a decision and the assessment should not take longer than 60 working days. If additional information is needed, this period can be suspended up to 20 working days (or 30 working days if the proposed acquirer is situated in a third country or is not subject to supervision). Subparagraph 2 of Article 22(3) CRD specifies that any further requests shall be at the supervisor’s discretion, but they can no longer be treated as suspensions. If the competent authorities do not oppose the proposed acquisition within the assessment period, it shall be deemed to be approved.