EBA欧洲银行-JC-2012-88-FINALESAs-Joint-response-to-the-COM-call-for-advice-on-fund_84页_679kb

Summary of EBA, EIOPA and ESMA's Response to the European Commission's Call for Advice on FICOD

Core Content

The European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA), collectively referred to as the ESAs, have responded to the European Commission's Call for Advice (CfA) on the Fundamental Review of the Financial Conglomerates Directive (FICOD). This advice aims to support the Commission in revising FICOD to enhance the supervision of financial conglomerates, especially in light of the lessons learned from the financial crisis.

Main Views and Recommendations

1. Perimeter of Supervision

• Recommendation 1: The perimeter of supervision should be expanded to include more entities and activities to avoid regulatory arbitrage and ensure thorough group-wide supervision.
• Suggested Changes:
  • Enlarge the definition of "financial sector" in Article 2(8) FICOD to include insurance ancillary services undertakings.
  • Include all special purpose entities (SPEs) and special purpose vehicles (SPVs) within the perimeter of supervision, as they may not always be captured by sectoral legislation or accounting rules.
• IORPs: The ESAs do not recommend including Institutions for Occupational Retirement Provision (IORPs) in the group-wide supervision for now due to national differences, but they suggest the Commission re-examine this in light of the quantitative impact assessment on IORPs.

2. Governance and Ultimate Responsible Entity

• Recommendation 4: The European Commission should identify and define an ultimate responsible entity for the financial conglomerate based on:
  • Control
  • Dominant entity from the market's perspective (e.g., a market-listed entity)
  • Ability to fulfill duties towards its subsidiaries and supervisors
• Recommendation 5: The ultimate responsible entity must have a coordinating and directing role in the group and be subject to the same internal control and compliance requirements as regulated entities.

3. Supervisory Empowerment and Enforcement

• Recommendation 6: A dual enforcement regime should be introduced, targeting both the ultimate responsible entity and its subsidiaries for group-wide risks and individual responsibilities.
• Recommendation 7: Supervisors should have a minimum set of enforcement measures, including informative and investigative tools, and be able to apply sanctions to mixed activity holding companies (MAHCs) or mixed activity insurance holding companies (MAIHCs) if they fail to provide required information.
• Recommendation 8: The ESAs recommend enhancing the use of the supervisory tool kit provided by FICOD and developing binding technical standards for a common reporting scheme on risk concentrations and intra-group transactions. They also suggest that the Commission should consider sectoral differences between CRD IV and Solvency II.

4. Supervisory Tools for Group Supervision

• Tool 1: Creation of an intermediate financial holding company to serve as the responsible entity for all regulated entities within the group.
• Tool 2: Designation of a single "point of entry" at the top of unregulated entities, which is not a legal person but a reference point for supervisors.
• Tool 3: Designation of a specific regulated entity as the point of entry, especially when the top entity cannot be effectively enforced against.

5. International Consistency and Legal Considerations

• The ESAs emphasize the need for international consistency with the Joint Forum Principles, which define financial conglomerates as groups with material financial activities in at least two regulated sectors.
• The advice does not aim to change company law principles but rather to allow prudential supervisors to intervene in intragroup relations for the sake of financial stability.
• The ESAs acknowledge that Solvency II and CRD IV may introduce group-wide requirements, but the current advice is based on existing sectoral texts.

Key Information

• The financial crisis highlighted the need for more comprehensive supervision of financial groups, including non-regulated entities.
• There is a consensus that the perimeter of supervision must be widened to include all relevant financial activities and entities.
• The ESAs are cautious about including IORPs due to national variations and suggest further review.
• The identification of risks in financial conglomerates must be consistent with the true nature of the group's exposure.
• The Commission is advised to ensure that the ultimate responsible entity is clearly defined and that enforcement mechanisms are robust and aligned with the group's structure and activities.

Conclusion

The ESAs' response underscores the importance of aligning the perimeter of supervision with the actual risk exposure of financial conglomerates, ensuring that both regulated and non-regulated entities are appropriately captured. They advocate for a more consistent and enforceable framework, while also recognizing the need for international consistency and national flexibility. The advice provides a comprehensive set of recommendations for the European Commission to consider in its fundamental review of FICOD.