Brussels, 12/09/2006 (Agence Europe) - On 12 September, Charlie McCreevy presented to the press a proposal for a directive amending the criteria and rules of procedure to be used for prudent assessment of acquisitions and increased shareholdings in the banking, insurance and real estate sectors (Directives 2006/48/EC, 92/49/EEC, 2002/83/EC, 2005/68/EC and 2004/39/EC). Anxious to lift the obstacles that hamper consolidation movements initiated by the financial markets, the European Commissioner for the internal market suggests inclusion in European legislation of a list of five criteria to be taken into account by national supervisory authorities when forging their decision. This proposal for a directive could be on the agenda of the November Ecofin Council, and the first reading by the EP may be held in December.
Mr McCreevy said consolidation of the financial markets is developing but is still being hampered in other sectors. This must, of course, be decided by the market and solely by the market, he said. His role, however, is to ensure that undue obstacles do not appear along the road hindering economic operations. He recalled that, to date, European legislation has allowed control authorities to stop mergers or acquisitions in the financial sector for reasons relating to the “quality” of the party making the acquisition. In his view, “these rules have not provided clarity” on how to assess the quality of the buyer, mainly because they do correspond to “specific criteria” and because they give the supervisory authorities “considerable latitude”.
Mr McCreevy therefore considers it necessary to “restrict the margin of manoeuvre” of national supervisory authorities. To achieve this, he suggests these authorities apply an exhaustive list of “five criteria” when assessing any request for merger or acquisition. The criteria are: 1) the reputation of the party making the acquisition (question: who is buying?); 2) the reputation and experience of those who will head the future entity (question: who will take the lead?); 3) the financial soundness of the party acquiring (question: can you afford this acquisition?); 4) the capacity of the buyer to respect European legislation on financial services; and 5) the existence of suspected money laundering or terrorist financing (question: can you confirm there is no threat?).
When asked about the welcome that Member States will give to his proposals, Mr McCreevy recalled that the ministers themselves had, in 2004, called on the Commission to carry out an analysis on the obstacles to crossborder mergers in financial services, and that the Commission had announced end 2005 what it planned to do (see EUROPE 8784 and 9061). “All Member States, except one”, Poland, “welcomed the approach”, the Commissioner said. On the subject of the five criteria envisaged, a Commission expert said they are “sufficiently broad, specific and relevant”. “We have had a long discussion” with the national supervisory authorities and “none of them was able to put other criteria forward”, he added.
Mr McCreevy suggests, moreover, that “clear, transparent and consistent” details should be given when assessing crossborder mergers and acquisitions in order to ”leave no room for political interference or protectionism”. In order to oppose the buyer's project, the relevant authorities will have a maximum of thirty working days (fifty days if the buyer is established in a third country), unlike the three months foreseen in current European legislation. They may make a written request to the buyer for further information that is communicated to it within ten working days. During these ten days, the maximum 30 working day time limit allowed for review will be suspended. In the event of opposition to a proposed merger or acquisition, the authorities must indicate to the buyer all the reasons for their decision. This information, a Commission expert points out, will not, however, be made public because of the potential impact that this could have on the financial markets and in order not to hamper appeal proceedings before national courts further to the decision by the national supervisory authority. Finally, the relevant authorities may fix a maximum time limit for concluding the deal.
Restating its approach in favour of evolution rather than revolution when it comes to overseeing financial services, Mr McCreevy said he hoped there would be better coordination between national authorities. At this stage, he added, he does not intend to foresee a single supervisory authority at European level. The Commission will not play a role except in the case of complaint filed by an economic operator or if it considers that the procedure in place has not been complied with, he said.