Question ID
2016_3010
Legal act
Directive 2013/36/EU (CRD)
Topic
Other issues
Article
22/23
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Type of submitter
Law firm
Subject matter
Rules on qualifying holdings in credit institutions
Question

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)?

Background on the question

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.

Submission date
Final publishing date
Final answer

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.

Disclaimer: This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Financial Stability, Financial services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.
Status
Final Q&A
Answer prepared by
Answer prepared by the European Commission because it is a matter of interpretation of Union law.
Note to Q&A
Update 26.03.2021: This Q&A has not yet been reviewed by the European Commission in the light of the changes introduced to Directive 2013/36/EU (CRD).

Disclaimer

The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.