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Tuesday, 16th April 2024
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Commission launches consultation on regulation of conglomerates Back  
The European Commission is assessing how best to regulate financial conglomerates, those single financial entities that offer a range of financial services such as banking, insurance and securities.

The Commission has launched a consultation stage where industry and other interested parties can make their comments in advance of drafting of legislation later this year. The Commission plans to publish a proposed Directive on the prudential supervision of financial conglomerates in Spring 2001.

According to the Commission 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 proposed Directive 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.’

The Commission’s objective of one wholesale financial market and open and secure retail markets cannot be achieved without state-of-the-art prudential rules and supervision. According to the Commission financial conglomerates have multiplied rapidly within Europe 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.

Through this consultation process and the proposed Directive the aim is to create a more level playing field so that 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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