19 December 2000

Commission launches consultations on regulation of conglomerates

Commission launches consultations
The European Commission has launched on 19 December 2000 consultations to seek the views of industry and other interested parties on the future regulation of financial conglomerates. The consultation document sets out the Commission’s current thinking on the key elements necessary in upcoming legislation in this field. Comments received by 10 February 2001 will be taken into account in the drafting of a Commission proposal for a Directive on the prudential supervision of financial conglomerates due for publication in the Spring of 2001. This legislation is one of the Commission’s ten current priorities for the creation of a truly integrated market in financial services as laid down in the Financial Services Action Plan.

The objective of one wholesale financial market and open and secure retail markets cannot be achieved without state-of-the-art prudential rules and supervision. The phenomenon of financial conglomerates has grown fast and although specific prudential issues are being discussed separately in the banking and insurance sectors, the continuing trend towards closer corporate links between financial institutions across sectors and across borders gives rise to new concerns that require new legislation.

The increasingly cross-border dimension of financial conglomerates, the need to maintain a level playing field across the EU and the protection of the stability of Europe’s financial system raises a number of issues that the Commission’s proposal will seek to tackle. In particular future legislation needs to enhance legal certainty and clarity for regulators, supervisors and the market by addressing inconsistencies between existing Directives in the financial services sector, which are sectoral in approach. A financial conglomerate consisting mainly of banks with a smaller degree of insurance activities should not, for example, be subject to substantially different rules than a group consisting mainly of insurance undertakings with a small part of banking activity. The importance of these issues has been recognised by the G-10 countries which last year issued a series of recommendations from the G-10 Joint Forum on Financial Conglomerates, which the Commission will also take into account when proposing EU legislation.

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