On February 11 2003 Directive 2002/87/EC on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate was published in the EU Official Journal and thereby entered into force.

The directive aims to address the supervisory issues that arise from the blurring of distinctions between the activities of firms in each of the banking, securities, investment services and insurance sectors.

The main objectives of the directive are to:

  • ensure that a financial conglomerate has adequate capital;

  • introduce methods for calculating a conglomerate's overall solvency position;

  • deal with the issues of intra-group transactions, exposure to risk, and the suitability and professionalism of management at financial conglomerate level; and

  • prevent situations in which the same capital is used simultaneously as a buffer against risk in two or more entities which are members of the same financial conglomerate ('double gearing'), and where a parent issues debt and downstreams the proceeds as equity to its regulated subsidiaries ('excessive leveraging').

The directive must be implemented by member states within 18 months of its publication (ie, by August 11 2004).

For further information on this topic please contact Philip Woolfson at Oppenheimer Wolff & Donnelly by telephone (+32 2 626 0500) or by fax (+32 2 626 0510) or by email ([email protected]).