On Wednesday 29 October, the European Commission proposed to make it easier for banks and insurance companies in the European Union to invest in shares under public programmes and schemes (‘legislative programmes’) set up at European, national and/or regional level.
For the banking sector, the EU institution provides an interpretation of the CRR Regulation (Article 133(5)) governing the capital requirements necessary for the acquisition of holdings in European companies operating in sectors of activity that are strategic for the EU and supported by public authorities.
Subject to the approval of its supervisor, a bank will be able to apply a lower risk weighting (100% instead of 250%) to its exposure to shares acquired under specific public schemes and programmes, thereby reducing the amount of capital required.
To ensure transparency, the programmes and schemes concerned will be listed in a specific public register managed at European level. All will have the following characteristics: public financial support, supervision by public authorities and limits on investment in eligible shares in terms of volume and/or location.
See the Commission communication: https://aeur.eu/f/j6w
Solvency II. As recently announced by the European Commissioner for Financial Services, Maria Luís Albuquerque (see EUROPE 13739/18), the European institution is also proposing to amend the Delegated Regulation (2015/35) implementing the Solvency II Directive, which governs the insurance sector. The aim is to put insurance companies on an equal footing with banks in terms of prudential treatment of equity investments under the public schemes and programmes identified above.
In addition, the amendment to the Delegated Act aims to reduce costs for insurers investing in securitised financial products, which currently represent less than 1% of their portfolio. In particular, it is suggested that the requirements for obtaining a financial rating for non-standardised securitised financial products be reduced.
The legislative initiative will also reduce the administrative burden on insurers by streamlining reporting obligations and making the rules more proportionate for the benefit of smaller insurance companies.
See the proposal for a Delegated Regulation: https://aeur.eu/f/j6u ; and its Annex: https://aeur.eu/f/j6v
“We are clarifying the way in which banks and insurers can co-invest with the public sector in the EU’s strategic priorities, such as clean technologies, biotechnologies, artificial intelligence, defence and security, within the framework of legislative programmes”, said Mrs Albuquerque in a statement, assuring that the measures presented “aim to encourage targeted investments, not uncontrolled risk-taking”. (Original version in French by Mathieu Bion)