Tag Archives: Financial control

Community financial aid to trans-European networks

Community financial aid to trans-European networks

Outline of the Community (European Union) legislation about Community financial aid to trans-European networks

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Regional policy > Management of regional policy > Trans-european networks

Community financial aid to trans-European networks

Document or Iniciative

Regulation (EC) No 67/2010 of the European Parliament and of the Council of 30 November 2009 laying down general rules for the granting of Community financial aid in the field of trans-European networks.

Summary

This regulation establishes the conditions and procedures for granting Community aid to projects of common interest in the field of trans-European networks for infrastructures in the fields of telecommunications, transport and energy.

Community aid may only be granted to projects of common interest. Parts of projects are also eligible when they form units which are technically and financially independent.

Community aid for projects can take one or more of the following forms:

  • co-financing of studies related to projects – except in exceptional cases, the Community contribution may not exceed 50% of the total cost of a study;
  • subsidies of the interest on loans granted by the European Investment Bank or other public or private financial bodies;
  • contributions towards premiums for loan guarantees from the European Investment Fund or other financial institutions;
  • direct grants to investments in duly justified cases;
  • risk-capital participation for investment funds with a focus on providing risk capital for trans-European network projects and involving substantial investment from the private-sector.

At least 55% of the funding for transport infrastructure projects should be allocated to railways (including combined transport) and a maximum of 25% to roads.

Conditions for financial aid

Community aid may be granted if the following conditions are fulfilled:

  • there is a financial obstacle to the achievement of a project;
  • the Community aid must not exceed the minimum necessary for the launch of a project;
  • except in exceptional circumstances, the total amount of Community aid must not exceed 10% of the total investment cost;
  • the Community aid must not, in principle, be granted to projects benefitting from other sources of Community funding.

The Commission may establish an indicative multiannual programme by sector to improve the efficiency of the European Union (EU). The programme will consist of projects of common interest in specific fields which require substantial funding over a long period of time. The programme must be reviewed, and if necessary revised, with regard to the effective progress of the projects.

Project selection criteria

Community aid is intended for projects that are potentially economically viable and for which the financial profitability at the time of application is deemed insufficient. The decision to grant Community assistance should also take account of:

  • the maturity of the project;
  • the stimulative effect on public and private finance;
  • the soundness of the financial package;
  • direct or indirect socio-economic effects, especially on employment;
  • the environmental consequences.

In particular in the case of cross-border projects, coordination between the various parts of the project must be taken into consideration.

Applications for financial aid

Applications for funding must be submitted to the Commission by the EU country concerned or, with the agreement of the EU country, by the body directly concerned. This regulation stipulates the information required for the assessment and identification of applications, including a provisional timetable and a description of control measures to be put in place by the EU country concerned over the use of the requested funds.

Reduction, suspension and cancellation of aid

The Commission may reduce, suspend or cancel aid for a project if, after examination, there is an irregularity or a failure to comply with one of the conditions, or a significant change in the nature of the project for which the Commission’s approval was not requested.

Except in exceptional circumstances, approved aid will be cancelled by the Commission if the project has not started within two years following the expected start date. The Commission may demand reimbursement of any aid paid if the project in question has not been completed within ten years.

Funding

The financial framework for the implementation of this regulation for the period 2000 to 2006 is EUR 4 874 880 000.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 67/2010

19.2.2010

OJ L 27 of 30.1.2010

Alternative Investment Fund Managers

Alternative Investment Fund Managers

Outline of the Community (European Union) legislation about Alternative Investment Fund Managers

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

Alternative Investment Fund Managers

Document or Iniciative

Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (Text with EEA relevance).

Summary

This Directive aims at framing the activities of managers * of Alternative Investment Funds (AIFs) *. The goal is to create an internal market for these managers whilst putting in place a harmonised regulatory framework.

The Directive does not apply to:

  • holding companies;
  • institutions for occupational retirement provision;
  • supranational institutions;
  • national central banks;
  • national, regional and local governments;
  • employee participation systems or employee savings schemes;
  • securitisation special purpose entities.

Conditions for the authorisation of AIFMs

Alternative Investment Fund Managers (AIFMs) are entrusted with the portfolio management and risk management of AIFs. They may additionally perform duties of administration and marketing.

In order to carry out their activities, AIFMs must apply to the competent authorities of their home Member State for authorisation, and provide information concerning:

  • the persons conducting the business of the AIFM;
  • the identities of the AIFM’s shareholders and direct or indirect members;
  • a programme of activity;
  • remuneration policies and practices;
  • arrangements made for the delegation to third parties of AIFM functions.

They must also submit information on the AIFs they intend to manage, namely:

  • investment strategies;
  • where the AIF is established if the AIF is a feeder AIF*;
  • the rules or instruments of incorporation;
  • arrangements made for the appointment of the depositary.

Where the AIFM is an internally managed AIF, it must have an initial capital of at least EUR 300 000, whereas an external manager of AIFs must provide capital of at least EUR 125 000.

Operating conditions for AIFM activities

AIFMs entrusted with portfolio management are not permitted to invest all or part of the client’s portfolio in units or shares of the AIFs they manage. They must comply with the Directive on investor-compensation schemes. They may delegate their duties provided that they notify the competent authorities of their home Member State.

Remuneration policies practised by AIFMs must not encourage excessive risk taking. The European Securities and Markets Authority (ESMA), in cooperation with the European Banking Authority (EBA), ensures that remuneration practices comply with the principles laid down in:

  • Annex II to this Directive;
  • the Recommendation on remuneration policies in the financial services sector.

AIFMs must separate in functional and hierarchical terms risk management tasks from operational units, and from portfolio management. At least once a year, they must scrutinise the risk management systems put in place.

AIFMs must adopt procedures which enable them to monitor the AIF’s liquidity risk and guarantee the compliance of the liquidity profile of the investments of the AIF. AIFMs are to conduct stress tests regularly.

AIFMs are to put in place appropriate and coherent valuation procedures. AIFMs must comply with the law of the country in which the AIF is established, with respect to asset valuation and the calculation of the net asset value per unit or share of the AIF.

For each AIF that they manage, AIFMs shall appoint a single depositary, the main task of which is to monitor the AIF’s cash flow. The depositary may be:

  • a credit institution established in the EU pursuant to the Directive relating to the taking up and pursuit of the business of credit institutions;
  • an investment firm established in the EU and subject to the requirements of the Directive on capital adequacy;
  • another type of entity subject to prudential regulation and permanent supervision. Additional criteria may be laid down by the competent authorities in Member States.

Transparency requirements

AIFMs are to publish an annual report for each financial year for each of the AIFs they manage and for each of the AIFs they market, no later than 6 months following the end of the financial year. The annual financial report shall be published pursuant to the Directive on the transparency of information.

Vis-à-vis investors, AIFMs must make the following information available to them, namely:

  • a description of the AIF’s investment strategy and objectives;
  • a description of all fees, charges and expenses;
  • a description of the main legal implications of the contractual relationship;
  • the identity of the AIFM, the AIF’s depositary and auditor;
  • the identity of the prime broker.

In addition, AIFMs must periodically disclose to investors:

  • the percentage of the AIF’s assets subject to special arrangements;
  • any new arrangements for managing the liquidity of the AIF;
  • the current risk profile of the AIF.

The competent authorities of the AIFM’s home Member State must also be kept abreast of the principal markets and instruments where they trade on behalf of the AIFs they manage.

AIFMs managing specific types of AIF

This Directive distinguishes two types of AIFMs:

  • AIFMs managing leveraged AIFs (leverage is the effect on financial yield of different extents of the use of debt): the competent authorities of the AIFM’s home Member State must use the information that the AIFM provides in order to determine whether leverage contributes to increasing systemic risk in the financial system. In return, the AIFMs must demonstrate that the leverage limits set for each AIF they manage are reasonable.
  • AIFMs managing AIFs which acquire control of non-listed companies and issuers (control shall mean more than 50 % of the voting rights of the companies): AIFMs must notify the following of the acquisition of control:

    1. the non-listed company;
    2. the shareholders of the non-listed company;
    3. the competent authorities of the home Member State of the AIFM.

Rights of EU AIFMs to market and manage AIFs

AIFMs may market units or shares of any AIF that they manage. In that case, they must notify the competent authorities of their home Member State in respect of each AIF that they intend to market. The documentation to be provided is set out in Annex IV.

Specific risks in relation to third countries

AIFMs are permitted to manage third country AIFs which are not marketed in the EU provided that certain rules are complied with and that cooperation arrangements are in place between the competent authorities of the home Member State of the AIFM and the supervisory authorities of the third country where the AIF is established.

Key terms of the Act
  • AIFMs: legal persons whose regular business is managing one or more AIFs.
  • Alternative investment funds (AIFs): collective investment undertakings, including investment compartments thereof, which raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors and are not subject to the Directive on undertakings for collective investment in transferable securities.
  • Feeder AIF: an AIF which:
    1. invests at least 85 % of its assets in units or shares of another AIF (the “master AIF”);
    2. invests at least 85 % of its assets in more than one master AIF where those master AIFs have identical investment strategies;
    3. has otherwise an exposure of at least 85 % of its assets to such a master AIF.

Reference

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2011/61/EU

21.7.2011

22.7.2013

OJ L 174 of 1.7.2011

Review of the Lamfalussy process

Review of the Lamfalussy process

Outline of the Community (European Union) legislation about Review of the Lamfalussy process

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

Review of the Lamfalussy process

References

Communication from the Commission of 20 November 2007 entitled “Review of the Lamfalussy process – Strengthening supervisory convergence” [COM(2007) 727 final – Official Journal C 55 of 28.2.2008]

Summary

The Lamfalussy process was launched in 2001 for the purpose of strengthening the European regulatory and financial sector supervision framework. It consists of four levels. It starts with the adoption of the framework legislation (Level 1) and detailed implementing measures (Level 2). For the technical preparation of the implementing measures, the Commission is advised by committees, made up of representatives of national supervisory bodies, which exist in three sectors: banking, insurance and occupational pensions, and the securities markets. These committees then contribute to the consistent implementation of Community directives in the Member States, ensuring effective cooperation between the supervisory authorities and convergence of their practices (Level 3). Finally, the Commission enforces the timely and correct transposition of EU legislation into national law (Level 4).

Based on the review of this process, the Commission proposes practical improvements to strengthen the Community supervisory framework, especially during periods of market instability.

The evaluation of the Lamfalussy process is positive on the whole. However, despite undeniable contributions (flexible regulatory system, convergence, cooperation, etc.), there is a need for certain improvements.

Improvements in the legislative process and enforcement

Experience with the adoption of framework legislation and implementing measures has generally been positive, with only a few adjustments necessary between institutions with regard to supervision and implementation.

The evaluation of the schedules for the sequencing of the measures for the adoption of legislation and implementation (Levels 1 and 2) proves to be complicated as the deadlines are so variable. Consequently, it is difficult to set reasonable deadlines for both transposition and application. To resolve this, the transposition deadline for the whole legislative package could be linked to the adoption of the last implementing measures identified in Level 1. Work on the Level 1 and Level 2 measures could also be carried out more in parallel for greater coherence and facility.

The Lamfalussy process has enabled sound regulatory principles to be introduced and applied. In particular it has led to improved quality of legislation and enhanced transparency and predictability of European Union (EU) policy-making. However, Member States must refrain from adding further national rules (“gold-plating”). For greater transparency regarding consultation, the systematic publication of contributions should also become general practice. Finally, impact assessment should be extended to all significant implementing measures.

In order to increase transparency regarding transposition, the impact of the various disclosure instruments put in place (under the Capital Requirements Directive, etc.) should be strengthened. The Commission publishes regular statistics on the state of play of transposition by Member States, especially concerning Level 1 and Level 2 directives. For their part, Member States should provide the Commission with transposition tables. In the case of late implementation, infringement proceedings will be launched under Article 226 of the EC Treaty.

Supervisory cooperation and convergence

Supervisory cooperation and convergence are one of the innovations of the process, but have not always had the expected effects.

Strengthening the Level 3 Committees [or committees of regulators] is essential. As regards political accountability, an overall two-step approach (political guidance from the European Parliament, the Council and the Commission and committee reports) should enable them to deliver more results. In addition, the mission of the national supervisors is to be extended to include a cooperation and convergence requirement at European level. As regards the legal status of Level 3 Committees, changes to the legal framework will be considered concerning the decisions setting them up and the definition of their role.

Reducing the practical obstacles at European and national levels would strengthen mutual trust and the implementation of the measures. Decision-making, especially of the committees of regulators, should be facilitated (extension of qualified majority voting and definition of solutions in the case of a blocking minority) and carry more authority (even if non-binding) in relation to the national regulators and supervisors.

Member States also have a key role to play to guarantee the application in full of the standards and guidelines concerning:

  • the powers of national supervisors and sanctions. In view of the divergence of the national systems, the regulators and supervisors should have sufficient supervisory powers and tools, including sanctions, to be able to fulfil their obligations;
  • the guarantee of the operational independence of national supervisory authorities in four fields: institutional, regulatory, budgetary and supervisory;
  • the proposals strengthening cooperation between home and host regulators. The Commission’s role is to raise awareness, evaluate and take measures (delegation of tasks, multilateral memoranda of understanding, role of ‘lead’ supervisor, etc.).

The development of common standards to ensure optimum cooperation between colleges of supervisors would guarantee greater coherence and uniformity of application and would allow the problems of competences between home and host countries to be resolved.

Cross-sector cooperation is based on a joint protocol on cooperation, signed in 2005, and is provided for when added value can be expected from a joint action. Level 3 Committees have agreed on joint annual work programmes since 2006 to deal with priority subjects such as financial conglomerates and common reporting standards.

As regards crisis management, rapid information procedures must be provided for to ensure efficient, collective action in the case of a major market disturbance or financial crisis.

The Commission considers that some financial assistance from the EU budget may be appropriate in response to the calls made on the committees of regulators arising from their Community obligations.

European financial supervision

European financial supervision

Outline of the Community (European Union) legislation about European financial supervision

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

European financial supervision

Document or Iniciative

Communication from the Commission of 27 May 2009 – European financial supervision [COM(2009) 252 final – Not published in the Official Journal].

Summary

This Communication sets out the basic architecture for a new European financial supervisory framework. The European Commission proposes that this framework be composed of two new pillars:

  • the European Systemic Risk Council (ESRC);
  • the European System of Financial Supervisors (ESFS).

The European Systemic Risk Council (ESRC)

The financial crisis revealed the shortcomings of a system that was lacking in macro-financial supervision. Under the new system, it is essential to be able to identify risks to stability and to introduce an effective warning system. The current macro-prudential measure is too fragmented. It should be developed further.

The ESRC should be an independent body, responsible for safeguarding financial stability in the area of macro-prudential supervision at European level. It will not have any legally binding powers and shall be responsible for the following tasks:

  • collecting information and identifying potential threats;
  • prioritising risks according to their significance;
  • issuing warnings where applicable;
  • making recommendations if required;
  • monitoring the measures that are taken;
  • cooperating with the IMF, the FSB and third country counterparts.

Macro-prudential supervision will mainly be carried out by central banks. In this regard, the Commission proposes that the ESRC be composed of:

  • the President of the European Central Bank (ECB), responsible for the presidency of the ESRC;
  • a Vice-President (elected by the members of the ESRC);
  • the central bank governors from the 27 Member States;
  • the Vice-President of the ECB;
  • the Chairpersons from the three European supervisory authorities;
  • a member of the European Commission.

Each national central bank governor shall be accompanied by a representative of the national supervisory authorities, admitted as observers.

It is planned that the ESRC shall form part of the European legal and institutional framework. The Commission proposes that the ESRC should be established on the basis of Article 95 of the EC Treaty as a body without legal personality.

The European System of Financial Supervisors (ESFS)

The ESFS corresponds to a micro-prudential approach. Its duties are to set up a system which is in line with the objective of a stable and single market for financial services in the European Union. It will also be responsible for linking national supervisors into a strong Community network.

The ESFS shall form an operational European network. The three Committees of Supervisors are to be replaced by the following authorities, having a legal personality:

  • the European Banking Authority (EBA);
  • the European Insurance and Occupational Pensions Authority (EIOPA);
  • the European Securities Authority (ESA).

These three authorities shall:

  • establish a single set of harmonised rules;
  • ensure consistent application of EU rules;
  • manage disagreement between national supervisors;
  • make recommendations if there is a manifest breach of Community law;
  • create a common supervisory culture and consistent supervisory practices;
  • have full supervisory powers for some specific entities;
  • ensure a coordinated response in crisis situations;
  • collect micro-prudential information.

The ESFS shall be composed of:

  • the three supervisory authorities described above;
  • a steering committee;
  • national supervisory authorities.

With the establishment of the ESFS, and the three European Supervisory Authorities described above, the Commission intends to introduce a “single rule book” which will ensure uniform application of rules in the EU in order to safeguard the effective functioning of the internal market.

The ESFS is to be established on the basis of Article 95 of the EC Treaty.

Context

The October 2008 financial crisis revealed many shortcomings in financial supervision. As a response to this crisis, the Commission mandated a group chaired by Mr Larosière to propose recommendations in order to strengthen European supervisory arrangements. The Larosière Group thus presented a report on 25 February 2009 introducing a new system, which is set out in this Communication.

This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.

European Insurance and Occupational Pensions Authority

European Insurance and Occupational Pensions Authority

Outline of the Community (European Union) legislation about European Insurance and Occupational Pensions Authority

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Single market for services > Financial services: insurance

European Insurance and Occupational Pensions Authority (EIOPA)

Document or Iniciative

Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC.

Summary

This Regulation establishes the European Insurance and Occupational Pensions Authority (EIOPA). It forms part of the package of measures put in place to reform the European System of Financial Supervision (ESFS) which creates three authorities to supervise financial activities:

  • the European Systemic Risk Board;
  • the European Banking Authority;
  • the European Securities and Markets Authority.

The package also reforms existing legislation on financial matters with the Omnibus Directive and includes the Regulation conferring specific tasks upon the European Central Bank.

Supervision of the financial system of the European Union (EU) is further reinforced by the activities of:

  • the Joint Committee of the European Supervisory Authorities;
  • the competent or supervisory authorities of Member States.

Establishment and legal status of the EIOPA

The objective of the EIOPA is to safeguard the stability and effectiveness of the financial system. It acts mainly in the field of activities of:

  • insurance and reinsurance undertakings;
  • financial conglomerates;
  • institutions for occupational retirement provision;
  • insurance intermediaries;
  • corporate governance;
  • auditing;
  • financial reporting.

The EIOPA has a legal personality and has its seat in Frankfurt am Main.

Tasks and powers of the EIOPA

The EIOPA is responsible for carrying out certain tasks, such as:

  • contributing to the establishment of regulatory and supervisory standards and practices;
  • monitoring and assessing the market and trends in the area of its competence;
  • fostering the protection of policyholders, pension scheme members and beneficiaries.

In order to meet these objectives, the EIOPA has a leading role which consists in particular of:

  • developing draft regulatory and implementing technical standards;
  • issuing guidelines and recommendations;
  • providing a centrally accessible database of financial institutions in the area of its competence.

The EIOPA also carries out activities relating to consumer protection, for example by analysing consumer trends or by developing training standards for industry.

Organisation of the EIOPA

The EIOPA has a Board of Supervisors that is responsible for giving guidance on its activities. The Board is composed of:

  • a Chairperson;
  • the head of the competent national public authority;
  • a representative of the Commission;
  • a representative of the ESRB;
  • a representative of each of the two other European Supervisory Authorities.

The EIOPA also has a Management Board.

Joint bodies of the European Supervisory Authorities

The joint bodies of the European Supervisory Authorities are:

  • the Joint Committee of European Supervisory Authorities which is responsible for cooperating with them as regards financial conglomerates, accounting and auditing, micro-prudential analyses, retail investment products, measures combating money laundering and information exchange with the ESRB;
  • the Board of Appeal which provides legal advice on the legality of the exercise of the EIOPA’s exercise of its powers.

Remedies

Any natural or legal person may appeal against a decision of the EIOPA, in writing, within two months of the date of notification of the decision. The Board of Appeal has a period of two months as from the appeal being lodged to confirm the decision taken by the EIOPA or to remit the case to a competent body.

This Regulation repeals Decision 2009/79/EC.

Reference

Act Entry into force Deadline for transposition in the Member States Official Journal

Regulation (EU) No 1094/2010

16.12.2010

OJ L 331, 15.12.2010

Related Acts

Council Regulation (EU) No 1096/2010 of 17 November 2010 conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board [Official Journal L 331 of 15.12.2010].

Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority) Text with EEA relevance [OJ L 331 of 15.12.2010].

Commission Decision 2004/9/EC of 5 November 2003 establishing the European Insurance and Occupational Pensions Committee (Text with EEA relevance) [OJ L 3 of 7.1.2004].

European Securities and Markets Authority

European Securities and Markets Authority

Outline of the Community (European Union) legislation about European Securities and Markets Authority

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

European Securities and Markets Authority (ESMA)

Document or Iniciative

Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC [See amending act(s)].

Summary

This Regulation establishes the European Securities and Markets Authority (ESMA). It forms part of the package of measures implemented to reform the European System of Financial Supervision (ESFS) which creates three other organisations to monitor financial activities:

  • the European Systemic Risk Board;
  • the European Banking Authority;
  • the European Insurance and Occupational Pensions Authority.

The package also reforms existing legislation on financial matters with the Omnibus Directive and includes the Regulation conferring new tasks upon the European Central Bank.

Supervision of the financial system of the European Union (EU) is further reinforced by the activities of:

  • the Joint Committee of the European Supervisory Authorities;
  • the competent or supervisory authorities of Member States.

Establishment and legal status of the ESMA

The objective of the ESMA is to safeguard the stability and effectiveness of the financial system. It acts mainly in the field of activities of:

  • firms offering investment services;
  • corporate governance;
  • auditing;
  • financial reporting.

In addition, the scope of ESMA action covers:

  • the Directive on settlement finality in payment and securities settlement systems;
  • the Directive on financial collateral arrangements;
  • the Directive on the prospectus to be published when securities are offered to the public;
  • the Directive on the transparency of information about issuers of securities;
  • the Directive on Alternative Investment Fund Managers.

The ESMA has legal personality and has its seat in Paris.

Tasks and powers of the ESMA

The ESMA is responsible for carrying out certain tasks, such as:

  • contributing to the establishment of regulatory and supervisory standards and practices;
  • monitoring and assessing the market in the area of its competence;
  • fostering the protection of investors.

In order to meet these objectives, the ESMA has a leading role which consists in particular of:

  • developing draft regulatory and implementing technical standards;
  • issuing guidelines and recommendations;
  • providing a centrally accessible database of financial institutions in the area of its competence.

The ESMA also carries out activities relating to consumer protection, for example by analysing consumer trends or by developing training standards for industry.

Organisation of the ESMA

The ESMA has a Board of Supervisors that is responsible for giving guidance on its activities. The Board is composed of:

  • a Chairperson;
  • the head of the competent national public authority;
  • a representative of the Commission;
  • a representative of the ESRB;
  • a representative of each of the two other European Supervisory Authorities.

The ESMA also has a Management Board.

Joint bodies of the European Supervisory Authorities

The joint bodies of the European Supervisory Authorities are:

  • the Joint Committee of European Supervisory Authorities which is responsible for cooperating with them as regards financial conglomerates, accounting and auditing, micro-prudential analyses, retail investment products, measures combating money laundering and information exchange with the ESRB;
  • the Board of Appeal which provides legal advice on the legality of the ESMA’s exercise of its powers.

Any natural or legal person may appeal against a decision of the ESMA, in writing, within two months of the date of notification of the decision. The Board of Appeal has a period of two months as from the appeal being lodged to confirm the decision taken by the ESMA or to remit the case to a competent body.

This Regulation repeals Decision 2009/77/EC.

Reference

Act Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EU) No 1095/2010

16.12.2010

OJ L 331 of 15.12.2010

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Directive 2011/61/EU

21.7.2011

22.7.2013

OJ L 174 of 1.7.2011

Related Acts

Council Regulation (EU) No 1096/2010 of 17 November 2010 conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board [OJ L 331 of 15.12.2010].

Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority) Text with EEA relevance [OJ L 331 of 15.12.2010].

Commission Decision 2001/528/EC of 6 June 2001 establishing the European Securities Committee (Text with EEA relevance) [OJ L 191 of 13.7.2001].

Financial conglomerates

Financial conglomerates

Outline of the Community (European Union) legislation about Financial conglomerates

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

Financial conglomerates

Document or Iniciative

European Parliament and Council Directive 2002/87/EC of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC, 93/22/EEC, 98/78/EC and 2000/12/EC [See amending acts].

Summary

This Directive provides for supervision of the conglomerate and promotes closer coordination between the supervisory authorities for the individual sectors and the exchange of information between them.

Characteristic thresholds of a financial conglomerate

The Directive considers that the activities of a group occur mainly in the financial sector where the balance sheet total of the regulated and non-regulated financial sector entities in the group exceeds 40 % of the group’s balance sheet total.

The most important financial sector in a financial conglomerate is the sector with the highest average. The Directive regards the group as a conglomerate where it has significant activities in another financial sector.

Target entities for supplementary supervision at the level of a financial conglomerate

Supplementary supervision is to be applied to:

  • any regulated entity at the head of a financial conglomerate;
  • any regulated undertaking which has as its parent company a mixed financial holding company with its head office in the Union;
  • any regulated entity connected to another entity in the financial sector.

Solvency

Financial conglomerates must have adequate capital of their own. In particular, the multiple gearing of own funds must be abolished. The parent firm is no longer able to issue loans to finance its regulated subsidiaries («excessive leveraging»).

The proposal defines methods for calculating solvency ratios and capital adequacy at group level.

«Intra-group» transactions and risk concentration

Regulated entities and mixed financial holding companies are required to report:

  • any significant risk concentration at the level of the financial conglomerate;
  • any intra-group transaction.

An intra-group transaction is regarded as significant if it exceeds 5 % of the total amount of capital adequacy requirements of own funds at the level of a financial conglomerate.

Internal control mechanisms

Regulated entities at the level of a financial conglomerate are required to set internal control mechanisms which enable all the incurred risks to be measured.

Reporting procedures must also be implemented to identify, measure, monitor and control the intra-group transactions, as well as the risk concentration.

A mixed committee of European supervisory authorities is responsible for ensuring coherent cross-sector and cross-border supervision and compliance with EU legislation.

Supervision

The Directive provides for the appointment of a competent authority or coordinator responsible for the supplementary supervision of regulated entities of a financial conglomerate. It is responsible for:

  • coordinating and disseminating information;
  • ensuring supervisory overview and assessment of the financial situation;
  • assessing compliance with the rules on capital adequacy and of risk concentration and intra-group transactions;
  • assessing the financial conglomerate’s structure, organisation and internal control system;
  • planning and coordinating the supervisory activities.

The competent authorities responsible for supervising regulated entities belonging to a financial conglomerate and the coordinator for the financial conglomerate are required to cooperate closely with each other. In particular, they must cooperate in order to achieve harmonised supervisory practices.

Parent companies with their head office outside the European Union (EU)

Regulated entities whose head office is located outside the EU must be subject to supervision which is equivalent to that provided for by this Directive.

Role of the European Commission

The Commission is responsible for clarifying certain concepts, such as credit institutions, insurance undertakings and investment firms. It must also establish more precise methods for calculating capital adequacy in order to take account of developments on financial markets and prudential techniques.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2002/87/EC

11.2.2003

11.8.2004

OJ L 35, 11.2.2002

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2005/1/EC

13.4.2005

13.5.2005

OJ L 79, 24.3.2005

Directive 2008/25/EC

21.3.2008

OJ L 81, 20.3.2008

Directive 2010/78/EU

4.1.2011

OJ L 331, 15.12.2010

Successive amendments and corrections to Directive 2002/87/EC have been incorporated in the basic text. This consolidated version is for reference purpose only.


Another Normative about Financial conglomerates

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic

Internal market > Single market for services > Financial services: banking

Financial conglomerates

Document or Iniciative

European Parliament and Council Directive 2002/87/EC of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC, 93/22/EEC, 98/78/EC and 2000/12/EC [See amending acts].

Summary

This Directive provides for supervision of the conglomerate and promotes closer coordination between the supervisory authorities for the individual sectors and the exchange of information between them.

Characteristic thresholds of a financial conglomerate

The Directive considers that the activities of a group occur mainly in the financial sector where the balance sheet total of the regulated and non-regulated financial sector entities in the group exceeds 40 % of the group’s balance sheet total.

The most important financial sector in a financial conglomerate is the sector with the highest average. The Directive regards the group as a conglomerate where it has significant activities in another financial sector.

Target entities for supplementary supervision at the level of a financial conglomerate

Supplementary supervision is to be applied to:

  • any regulated entity at the head of a financial conglomerate;
  • any regulated undertaking which has as its parent company a mixed financial holding company with its head office in the Union;
  • any regulated entity connected to another entity in the financial sector.

Solvency

Financial conglomerates must have adequate capital of their own. In particular, the multiple gearing of own funds must be abolished. The parent firm is no longer able to issue loans to finance its regulated subsidiaries («excessive leveraging»).

The proposal defines methods for calculating solvency ratios and capital adequacy at group level.

«Intra-group» transactions and risk concentration

Regulated entities and mixed financial holding companies are required to report:

  • any significant risk concentration at the level of the financial conglomerate;
  • any intra-group transaction.

An intra-group transaction is regarded as significant if it exceeds 5 % of the total amount of capital adequacy requirements of own funds at the level of a financial conglomerate.

Internal control mechanisms

Regulated entities at the level of a financial conglomerate are required to set internal control mechanisms which enable all the incurred risks to be measured.

Reporting procedures must also be implemented to identify, measure, monitor and control the intra-group transactions, as well as the risk concentration.

A mixed committee of European supervisory authorities is responsible for ensuring coherent cross-sector and cross-border supervision and compliance with EU legislation.

Supervision

The Directive provides for the appointment of a competent authority or coordinator responsible for the supplementary supervision of regulated entities of a financial conglomerate. It is responsible for:

  • coordinating and disseminating information;
  • ensuring supervisory overview and assessment of the financial situation;
  • assessing compliance with the rules on capital adequacy and of risk concentration and intra-group transactions;
  • assessing the financial conglomerate’s structure, organisation and internal control system;
  • planning and coordinating the supervisory activities.

The competent authorities responsible for supervising regulated entities belonging to a financial conglomerate and the coordinator for the financial conglomerate are required to cooperate closely with each other. In particular, they must cooperate in order to achieve harmonised supervisory practices.

Parent companies with their head office outside the European Union (EU)

Regulated entities whose head office is located outside the EU must be subject to supervision which is equivalent to that provided for by this Directive.

Role of the European Commission

The Commission is responsible for clarifying certain concepts, such as credit institutions, insurance undertakings and investment firms. It must also establish more precise methods for calculating capital adequacy in order to take account of developments on financial markets and prudential techniques.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2002/87/EC

11.2.2003

11.8.2004

OJ L 35, 11.2.2002

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2005/1/EC

13.4.2005

13.5.2005

OJ L 79, 24.3.2005

Directive 2008/25/EC

21.3.2008

OJ L 81, 20.3.2008

Directive 2010/78/EU

4.1.2011

OJ L 331, 15.12.2010

Successive amendments and corrections to Directive 2002/87/EC have been incorporated in the basic text. This consolidated version is for reference purpose only.

European Banking Authority

European Banking Authority

Outline of the Community (European Union) legislation about European Banking Authority

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

European Banking Authority (EBA)

Document or Iniciative

Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC.

Summary

This Regulation establishes the European Banking Authority (EBA). It forms part of the package of measures implemented to reform the European System of Financial Supervision (ESFS) which creates three other organisations to monitor financial activities:

  • the European Systemic Risk Board;
  • the European Insurance and Occupational Pensions Authority;
  • the European Securities and Markets Authority.

This package also reforms existing financial legislation with the “Omnibus” Directive and the Regulation conferring new tasks upon the European Central Bank.

Supervision of the financial system of the European Union (EU) is further strengthened by the activities of:

  • the Joint Committee of the European Supervisory Authorities;
  • the competent or supervisory authorities of Member States.

Establishment and legal status of the EBA

The EBA has the objective of safeguarding the stability and effectiveness of the banking system and focuses particularly on any risk presented by financial institutions, the failure of which may impair the operation of the financial system or the real economy. It acts in the following fields of activities:

  • credit institutions;
  • financial conglomerates;
  • investment firms;
  • payment institutions;
  • e-money institutions.

The EBA has a legal personality and has its seat in London.

Tasks and powers of the EBA

The EBA has certain tasks, in particular:

  • to contribute to the establishment of regulatory and supervisory standards and practices;
  • to monitor and assess the market and credit trends, particularly for households and SMEs;
  • to foster depositor and investor protection.

In order to fulfil these objectives, the EBA has a leading role consisting chiefly of:

  • the elaboration of draft regulatory and implementing technical standards;
  • issuing guidelines and recommendations;
  • providing a (centrally accessible) database of financial institutions in the area of its competence.

The EBA also carries out activities relating to consumer protection, for example by analysing consumer trends and preparing training standards for the industry.

Organisation of the EBA

The EBA has a Board of Supervisors which has the task of giving guidance to the work of the Authority. The Board is composed of:

  • a Chairperson;
  • the head of the competent national public authority;
  • a representative of the Commission;
  • a representative of the European Central Bank;
  • a representative of the ESRB;
  • and a representative of each of the other two European Supervisory Authorities.

The EBA also has a Management Board.

Joint bodies of the European Supervisory Authorities

The joint bodies of the European Supervisory Authorities are:

  • the Joint Committee of the European Supervisory Authorities which is to cooperate with the authorities regarding financial conglomerates, accounting and auditing, micro-prudential analyses, retail investment products, measures combating money laundering and information exchange with the ESRB;
  • the Board of Appeal which provides legal advice on the legality of the ABE’s exercise of its powers.

Remedies

Any natural or legal person may appeal against a decision of the ABE, in writing, within two months of notification of the decision. The Board of Appeal has a period of two months after the appeal has been lodged to confirm the decision taken by the ABE or to remit the case.

This Regulation repeals Decision 2009/78/EC.

Reference

Act Entry into force Deadline for transposition in the Member States Official Journal

Regulation (EU) No 1093/2010

16.12.2010

OJ L 331 of 15.12.2010

Related Acts

Council Regulation (EU) No 1096/2010 of 17 November 2010 conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board [OJ L 331 of 15.12.2010].

Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 amending directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority) Text with EEA relevance [OJ L 331 of 15.12.2010].

Commission Decision 2004/10/EC of 5 November 2003 establishing the European Banking Committee (Text with EEA relevance) [OJ L 3 of 7.1.2004].

Iceland – Taxation

Iceland – Taxation

Outline of the Community (European Union) legislation about Iceland – Taxation

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Taxation

Iceland – Taxation

acquis) and, more specifically, the priorities identified jointly by the Commission and the candidate countries in the analytical assessment (or ‘screening’) of the EU’s political and legislative acquis. Each year, the Commission reviews the progress made by candidates and evaluates the efforts required before their accession. This monitoring is the subject of annual reports presented to the Council and the European Parliament.

Document or Iniciative

Commission Report [COM(2011) 666 final – SEC(2011) 1202 final – Not published in the Official Journal].

Summary

The 2011 Report highlights the additional progress regarding taxation which needs to be made by Iceland before its accession to the European Union (EU).

EUROPEAN UNION ACQUIS (according to the Commission’s words)

The acquis on taxation essentially covers the area of indirect taxation, which comprises VAT (value-added tax) and excise duties. It lays down scope, definitions and principles for VAT. Excise duties on energy products, tobacco products and alcoholic beverages are regulated by EU legislation. With regard to direct taxation, the acquis covers some aspects of the taxation of individuals’ savings and corporate taxes. Furthermore, Member States are required to comply with the principles of the code of conduct relating to corporate taxes, which seeks to abolish harmful tax measures. Administrative cooperation and mutual assistance between Member States aims at ensuring the smooth running of the internal market in the field of taxation and provides instruments for preventing intra-Community fraud and tax evasion. Member States must ensure that they have the necessary implementation capacities, specifically connectivity with the EU’s IT taxation systems.

EVALUATION (according to the Commission’s words)

The Commission notes the progress made by the country, even though Iceland’s taxation legislation remains only partially aligned with the EU acquis. The country continues to benefit from good administrative capacity in the field of taxation. However, a strategy should be defined to improve the interconnectivity and interoperability of the IT systems used in the field of taxation with the European IT systems.

Overall, the system of financial control is largely aligned to international standards and EU good practice. Limited legislative progress in this field is also noted.

Finally, targeted actions are required to complete the preparations, particularly the preparation of a public internal financial control policy paper, and to ensure the separation between internal and external audit. Preparations for the protection of the EU’s financial interests must also be started.