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Summary of Comments on the Review of FCD by the British Bankers' Association

Core Content

The British Bankers' Association (BBA) has provided detailed comments on the Review of the Financial Conglomerates Directive (FCD), expressing overall support for the Commission's objectives and the Committee's analysis. The BBA emphasizes the importance of flexibility and structure-neutral solutions in regulating financial conglomerates in a risk-sensitive manner. They also highlight the need for clarity and practical implementation in the proposed recommendations, especially regarding the identification of financial conglomerates and the treatment of participations.

Main Views and Key Points

General Comments on the Whole Review of FCD

• Support for the Commission's Aims: The BBA supports the Commission's objectives and the in-depth analysis provided by the Committee.
• Pragmatic and Flexible Solutions: They appreciate the Committee's pragmatic and flexible approach, which is essential for effective supervision of financial conglomerates.
• Structure-Neutral Approach: The BBA advocates for maintaining and promoting structure-neutral solutions to ensure fairness and consistency across different types of financial groups.

Chapter 2: Definitions of Holding Companies and Sectoral Group Supervision

• Agreement with Analysis: The BBA agrees with the analysis on the definitions of holding companies and their impact on sectoral group supervision.
• Support for MFHC Supervision: They support the extension of consolidated supervision to Mixed Financial Holding Companies (MFHCs), provided that it is proportionate and does not lead to unintended consequences such as banking being captured under insurance rules.
• Reporting Burden: The BBA emphasizes that the proposed solution should not increase the reporting burden on institutions.

Chapter 3: Definition of "Financial Sector" and Threshold Conditions

• Inclusion of Entities: The BBA agrees with the analysis on including entities in the identification of financial conglomerates.
• AMCs Inclusion: They support the inclusion of Asset Management Companies (AMCs) in the identification process, as long as flexibility is preserved.
• Threshold Flexibility: The BBA endorses the proposed solutions to the threshold issue, noting the need for more flexibility.
• Concerns on Threshold Calculations: They raise concerns about the potential impact of external market conditions on the identification of financial conglomerates, particularly for insurers whose capital and asset totals may decrease during economic downturns.

Chapter 4: Implications of Participations in Identification and Supplementary Supervision

• Support for Analysis and Recommendations: The BBA agrees with the analysis and proposed recommendations on the treatment of participations.
• Concept of "Participations": They suggest that the concept of "participations" as defined in the 4th Company Law Directive, with the idea of a "durable link," may introduce unnecessary complexity.
• Preference for "Factual Control": The BBA recommends using the concept of "factual control" as a criterion for determining whether an entity should be subject to supplementary supervision, arguing that it is more practical and less ambiguous than "durable link."

Chapter 5: Treatment of Participations in Risk Concentrations and Intra-Group Transactions

• Agreement with Analysis and Recommendations: The BBA agrees with the analysis and proposed recommendations regarding the treatment of participations in risk concentrations and intra-group transactions.
• Clarification of "Intra-Group Transactions": They express concern over the broad and vague definition of "intra-group transactions" in the FCD, suggesting the term "exposure" would be more appropriate.
• Call for Guidance: The BBA highlights the need for more detailed Level 3 guidance to clarify the concept of intra-group transactions, particularly in distinguishing between inter-sectoral and intra-sectoral transactions.
• Reference to Previous Comments: They reference the European Banking Federation's (EBF) 2008 comments, noting that the EBF had previously raised concerns about the scope of intra-group transactions and suggested that conglomerates should report on inter-sectoral transactions above a certain threshold only.

Conclusion

The BBA generally supports the proposed changes to the FCD, particularly the extension of consolidated supervision to MFHCs and the inclusion of AMCs in the identification process. However, they stress the importance of maintaining flexibility, avoiding unintended consequences, and providing clear guidance to ensure effective and practical implementation. Their comments reflect a preference for a structure-neutral, fact-based approach to supervision, emphasizing the need for clarity and proportionality in regulatory measures.