Brussels, 01/08/2010 (Agence Europe) - On 16 August, the European Commission proposed modifications to European legislation on the prudential supervision of financial conglomerates (Directive 2002/87/EC). This legislative revision aims to resolve the most urgent technical problems which have come to light with the financial crisis of 2008, amongst other things. The new rules may be in force from 2011. The Commission will then take part in a debate extended to international level on the supervision of financial conglomerates, which will raise questions such as the scope of the control or calculation of own funds applicable to these entities.
The assessment of the legislation showed that adequate supervision could not apply to certain conglomerates due to their legal structure. In some cases, national supervisors are bound to apply either banking/insurance legislations, or the legislation relevant to conglomerates. With the proposed revision, they would no longer have to choose between several sets of rules, even if the parent company of the conglomerate is a holding. Additionally, in order to identify a conglomerate, the legislative proposal brings in risk-based indicators on top of the quantitative indicators already in force. It includes portfolio management companies in the calculations on the thresholds in place to identify a financial conglomerate. Lastly, it exempts from the directive any group with managed assets below €6 billion and with negligible risks at group level.
Financial conglomerates, which are active in several sectors of activity, can include banks, insurance companies, investment companies and/or portfolio management companies. Some of them may be made up of several hundred entities. Directive 2002/87/EC complements the European directives governing the prudential supervision of banks and insurance companies by bringing in additional consolidated supervision at group level. By means of this additional layer of supervision, the national supervisor responsible for coordinating supervision at conglomerate level ensures that the capital of the financial institution is not multiple-use and assesses a number of specific risks (risks of contagion and concentration, complexity of management). (M.B./transl.fl)