29 November 2017

European Commission: Financial Conglomerates Directive (FICOD) *the evaluation report has been replaced by a SWD

The purpose of this Staff Working Document is to assess the effectiveness, efficiency, coherence, relevance and EU-added value of initiatives. This analysis covers the original FICOD (Directive 2002/87/EU) and the amending Directive (2011/89/EU "FICOD1").

This analysis also covers the two Delegated Regulations (DR) adopted to support the application of the FICOD rules - the DR on the uniform conditions of application of the calculation methods for determining the amount of capital required at the level of the financial conglomerate (Commission Delegated Regulation (EU) No 342/2014 of 21 January 2014) and the DR on risk concentration and intra-group transactions (Commission Delegated Regulation (EU) 2015/2303 of 28 July 2015). 

This Staff Working Document sets out the Commission Services' analysis of FICOD and draws conclusions on the continued fitness of FICOD in achieving its objectives. 

This Staff Working Document outlines the Commission Services' analysis of FICOD. It highlights a number of ways in which the effectiveness, efficiency, relevance, coherence and EU added value of FICOD has evolved and changed since its adoption in 2002.

A first conclusion of this report is that it remains important to keep in place a framework for the supervision of mixed-activity financial groups, a framework that is provided by FICOD. FICOD has, in general, functioned well and there is no evidence of failures of financial institutions which could have been perceived as due to the weaknesses in FICOD provisions.

The message received from the consultation – particularly from supervisory authorities – is that the consideration of group risks is still an important part of ensuring financial stability and investor protection. 

Since the adoption of the original FICOD in 2002, the regulatory landscape in which Financial Conglomerates operate has changed significantly. The development of enhanced sectorial regimes, and in particular the enhanced group supervision regime under Solvency II, has changed the relevance and application of FICOD, leading to a certain number of inconsistencies. However, the framework still functions to capture group risks and gives supervisors oversight over these cross-sector groups. In some instances the gaps and inconsistencies are addressed by supervisors in the application of the FICOD framework and therefore do not fundamentally undermine the effectiveness of the FICOD framework. 

Overall, FICOD remains a useful supervisory tool.

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