Financial authorities consult on conglomerates
By Manon Malhère | Monday 14 May 2012
The Joint Committee of the European Financial Supervisory Authorities’ Subcommittee on Financial Conglomerates (JCFC)
(1) has launched a public consultation on the review of the Financial Conglomerates Directive (FICOD - see box). It comes in response to a “call for technical advice” from the European Commission, in April 2011. Besides the enlargement of the field of application for the directive, the document focuses on internal governance requirements and sanctions and supervisory powers under FICOD. Stakeholders will have until 13 August to contribute to the consultation paper.
On the enlargement of the field of application of the directive, and more specifically on the scope of supervision, the committee has proposed a broader definition of financial conglomerates and allowing a wider range of bodies to be included.
“There is an emerging consensus that the financial activities performed by a group should be appropriately supervised, regardless of whether those activities are performed by regulated or non-regulated entities,” the committee says.
Significantly, the committee has proposed changing the definition of ‘financial sector’ and/or ‘regulated entities’. An expanded definition of ‘financial sector’ would allow the inclusion within the field of application of all special purpose entities/vehicles (SPV) as well as insurance ancillary services. Stakeholders are also asked to give their opinion on the inclusion of institutions for occupational retirement provision (IORP) within the category of financial conglomerates.
On internal governance rules, the committee recommends addressing requirements and responsibilities to a designated entity within the financial conglomerate, according to fixed criteria. Stakeholders are also questioned on rules to be imposed on this entity regarding the surveillance of the group.
Finally, the consultation addresses the powers of national surveillance authorities, and sanctions.
Directive 2002/87/EC, known as the Financial Conglomerates Directive - FICOD), was most recently revised in 2011. It lays down rules to govern the complementary surveillance of credit organisations, insurance and investment companies belonging to a financial conglomerate. It is principally based on the potential risk of double employment and systemic risk. According to the Commission (and therefore the legislation in force), a financial conglomerate is a group or sub-group with a regulated entity at its head, in which at least one of the subsidiaries of the group or sub-group is a regulated entity.
The Commisison will present a proposal revising this directive at the end of the year. (1) European Banking Authority, European Insurance and Occupational Pensions Authority and the ESMA