"Managed on a unified basis" is not a defined term under Regulation (EU) No 575/2013. In order to ensure legal certainty, clarification is needed on the necessary scope of unified management. The phenomenon of reciprocal cross holding in combination with close relationships and interconnections between board members is generaly relevant in the Austrian banking and insurance industry. In Italy and Germany the system of reciprocal cross holding between banks, insurers and industrial companies (in Germany referred to as “Deutschland AG”) has dissolved due to the lack of transparency and propensity for abuse.

Example:

Three institutions are linked to each other as follows:

a) Reciprocal cross holding

The three institutions have a direct and indirect interest in each other (cross holding) and regularly perform capital increases coordinated with each other in time. In this context, each of the three institutions was provided with capital which, from an economic point of view, was raised at least partially by one of the three institutions itself through co-subscription to the respective capital increase of the other institutions.

As a result of the reciprocal cross holding, the own funds of the three institutions are artificially increased. The capital increase amounts mutually subscribed by the three institutions represent only book capital, but not own funds from a regulatory perspective. These subscription amounts provided within the three institutions are to be deducted from the institution’s own funds in accordance with Article 36 CRR. In such case the deduction shall be made in accordance with Article 36 paragraph 1 lit g, without taking advantage of any threshold and not in accordance with Article 36 paragraph 1 lit i.

b) Syndicate contracts

Two of the three institutions, together with other shareholders, form a syndicate in respect of the shares of the third institution. There are therefore three syndicates. The syndication agreements essentially include provisions concerning the joint exercising of voting rights in the shareholders’ meeting of the third institution as well as mutual pre-emption rights of the syndicate partners. The two institutions together hold a simple majority in the respective syndicate of the third institution. The float shareholders of each institution always vote in favor of the respective syndicate. Due to the syndicate and the free float always voting in favor of the respective syndicate, two institutions dominate the decision-making process in the shareholders' meetings of the third institution. This enables all three institutions to pursue their joint business policy.

c) Formation of a group 

According to their own understanding the three institutions form a “group” which has joined together in order to be externally independent. They use a publicly well-known and effective common brand. The mutual syndicate contracts between the three institutions ensure that the defined group strategy is implemented. The three institutions therefore strategically work closely together on the basis of an entanglement under company law and corporate governance.

d) Area allocation

The three institutions agreed on a strict area allocation.

e) Location sharing

The three institutions have decided to share locations abroad.

f) Joint special purpose subsidiaries

The three institutions founded a number of jointly held subsidiaries for special purposes (e.g. for the issuance of tax-advantaged housing bonds on a fiduciary basis; for securing large credit exposures of the institutions by assuming guarantees, suretyships and other liabilities for credits and loans; for the joint operation of an exclusive data processing centre, the development of IT applications operation and maintenance of all IT applications and the responsibility for standards, methods and IT security).