The Committee of European Banking Supervisors, the Committee of European Insurance and Occupational Pensions Supervisors and the Committee of European Securities Regulators (together the 3L3 Committees) have jointly published a consultation paper on their guidelines for the prudential assessment of acquisitions and increase of holdings in the financial sector required by Directive 2007/44/EC (the Consultation Paper).

Directive 2007/44/EC amends prudential Directives by introducing identical rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the banking, insurance, reinsurance and securities sectors. Directive 2007/44/EC sets out five assessment criteria which are:

  • Reputation of the proposed acquirer. Recital 8 of Directive 2007/44/EC addresses the reputation of the acquirer:

“With regard to the prudential assessment, the criterion concerning the ‘reputation of the proposed acquirer’ implies the determination of whether any doubts exist about the integrity and professional competence of the proposed acquirer and whether these doubts are founded. Such doubts may arise, for instance, from past business conduct. The assessment of the reputation is of particular relevance if the proposed acquirer is an unregulated entity but should be facilitated if the acquirer is authorised and supervised within the European Union”.

  • Reputation and experience of those who will direct the business. This criterion is formulated in Directive 2007/44/EC as:

“The reputation and experience of any person who will direct the business of the [financial institution] as a result of the proposed acquisition”.

  • Financial soundness of the proposed acquirer. This criterion is formulated in Directive 2007/44/EC as:

“The financial soundness of the proposed acquirer, in particular in relation to the type of business pursued and envisaged in the [financial institution] in which the acquisition is proposed”.

  • Compliance with prudential requirements. This criterion is formulated in Directive 2007/44/EC as:

“Whether the [financial] institution will be able to comply and continue to comply with the prudential requirements based on [the prudential European] Directive[s], in particular, whether the group of which it will become a part has a structure that makes it possible to exercise effective supervision, effectively exchange information among the competent authorities and determine the allocation of responsibilities among the competent authorities”.

  • Suspicion of money laundering or terrorist financing. This criterion is formulated in Directive 2007/44/EC as:

“Whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing within the meaning of Article 1 of Directive 2005/60/EC is being or has been committed or attempted, or that the proposed acquisition could increase the risk thereof”.

In the Consultation Paper the 3L3 Committees have agreed to work together:

  • To reach a common understanding on the five assessment criteria laid down by Directive 2007/44/EC in order to foster convergence of supervisory practices in this field.
  • To define cooperation arrangements to ensure an adequate and timely flow of information between supervisors, taking into account the limited time provided under Directive 2007/44/EC for completing prudential assessments.
  • To establish an exhaustive and harmonised list of information that proposed acquirers should include in their notifications to the competent supervisory authorities.

Comments on the Consultation Paper are due by 3 October 2008.

View Guidelines for the prudential assessment of acquisitions and increase of holdings in the financial sector required by Directive 2007/44/EC, (PDF 310KB), 11 July 2008