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Summary of Comments on the Review of FCD by the French Banking Federation (FBF)

Core Content

The French Banking Federation (FBF) has provided detailed comments on the Joint Task Force on Financial Conglomerates (JCFC) Review of the Financial Conglomerates Directive (FCD). The FBF supports the JCFC's analysis of the issues related to the supervision of financial conglomerates and believes that the proposed solutions can contribute to improving the regulatory framework. However, the FBF emphasizes the need for legislative changes to ensure maximum convergence and reduce regulatory arbitrage and competition distortions.

Main Views and Key Points

General Comments

• Agreement with Analysis: The FBF agrees with the JCFC's analysis of the FCD's shortcomings in defining the supervision framework.
• Need for Legislative Change: The FBF believes that level three guidance is insufficient to prevent regulatory arbitrage and competition distortions. They advocate for legislative changes to address these issues.
• Support for Regulatory Convergence: The FBF aims to promote healthy competitive conditions through appropriate regulations.

Chapter 2: Definitions of Holding Companies and Sectoral Group Supervision

• Q1: The FBF agrees with the JCFC's analysis.
• Q2: The FBF supports option 1, which aims to remove the shortcomings of the current legislation. They also note that banking legislation already allows for a broader definition of financial conglomerates.
• Other Comments: The FBF does not provide additional comments on this chapter.

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

• Part 1: Inclusion of Entities
  • Q3: The FBF agrees with the JCFC's analysis.
  • Q4: The FBF supports option 2, which provides extra guidance to supervisors for identifying financial conglomerates.
• Part 2: Inclusion of AMC and Sector Identification
  • Q5: The FBF agrees with the JCFC's analysis.
  • Q6: The FBF agrees with option 2 and supports the need for flexibility in the identification process.
• Part 3: Quantitative Thresholds for Supplementary Supervision
  • Q9: The FBF agrees that the FCD should allow more flexibility for smaller conglomerates and address waiver eligibility for larger ones.
  • Q10: The FBF supports option 1 (no legislative change) but advocates for guidance on the application of the waiver under Article 3(3) of the FCD. They oppose options 4 and 5 and suggest that option 2 requires strong guidelines to prevent regulatory arbitrage.
  • Q11: The FBF does not provide specific suggestions or evidence for this question.

Chapter 4: Treatment of Participations and Identification of Financial Conglomerates

• Q12: The FBF disagrees with the JCFC's analysis and suggests that the "durable link" criterion should be removed, aligning definitions with IASB accounting standards.
• Q13: The FBF opposes the JCFC's recommendation for Part 1 (§123) and insists on legislative changes to align FCD rules with accounting standards. They also oppose the JCFC's advice on options for Part 2 aspects a) and b), arguing that guidelines cannot ensure consistent implementation and prevent competition distortions. However, they agree with the JCFC's recommendation for Part 2 aspect c.
• Q14: The FBF does not provide specific suggestions or evidence for this question.
• Other Comments: The FBF does not provide additional comments on this chapter.

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

• Q15: The FBF agrees with the JCFC's analysis, noting that entities not under control may lack the necessary information for compliance with risk concentration and intra-group transaction requirements.
• Q16: The FBF disagrees with the proposed recommendations and suggests that risk concentration and intra-group transactions supervision should be limited to controlled companies fully or proportionally consolidated. Participations and equity method consolidations should be excluded from IGT/RC/IG.
• Q17: The FBF does not provide specific suggestions or evidence for this question.
• Other Comments: The FBF does not provide additional comments on this chapter.

Conclusion

The FBF generally supports the JCFC's analysis and recommendations but stresses the importance of legislative changes to enhance clarity, consistency, and effectiveness in the supervision of financial conglomerates. They emphasize the need to align definitions with accounting standards and to prevent regulatory arbitrage by ensuring a level playing field across jurisdictions.