14 March 2002

EP adopted Directive on Financial Conglomerates (1st reading)

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The rapporteur Alain Lipietz addressed the question of Financial Conglomerates. The Commission's proposal was important for savers and consumers who would be able to benefit from an integrated financial market in Europe. It particularly affected the banking and insurance sectors.

Compromise amendments were now being proposed which he trusted would be acceptable to Council. He emphasised, however, that there was no intention to dilute the basic Commission approach to lay down prudential rules. He trusted that agreement on the basic proposal would create the foundations for further international negotiations under the Basle II process.

The new definition of conglomerate excludes close links and horizontal agreements. In the case of groups headed by a regulated entity or mixed financial holding company with the head office inside the EU, cross-sectoral activities are to be regarded as significant if the threshold value is below 40% but the consolidated or aggregated balance sheet total of the smallest financial sector exceeds € 3 billion.

Several other amendments were adopted regarding the participation that can be deducted from prudential capital in the insurance sector, where no such rules were in existence. With regard to supervision, Parliament wants a single coordinator. The identity of the coordinator must be notified to the regulated entities.

Replying to the debate, Frits Bolkestein said he could accept a large number of amendments to the conglomerates proposal, including the one relating to 'double gearing', if reworded. He could not, however, go along with those amendments which attempted to limit the scope of the legislation or sought to change the rules for calculating capital adequacy. He was, however, prepared to look for a compromise.

Due to latest changes and agreements on the original agreed report in Committee the finally adopted text is only available on the plenary session document pages 10-26.

(see original Lipietz report)

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