The Commission has published its plans for a revised Financial Conglomerates Directive (FCD). It feels the current system does not give supervisors enough power to supervise conglomerates from different sectors of the financial market or to focus on parent companies or other important unregulated group companies. It wants to change the current (2002) FCD, so that:
- sector-specific and supplementary supervision could apply to banking and insurance firms’ parent entities, so that banking groups that take stakes in insurance companies would still be subject to banking supervision and vice versa;
- financial supervisors would have power to identify a group as a financial conglomerate and apply supplementary supervision to it, using a risk-based approach; and
- supervisors can waive supplementary supervision for a group if it is a small group or if it presents low risk.
The Commission thinks the proposals close unintended loopholes in the current FCD, which do not allow the necessary amount of cross-sector supervision. The Commission has published background papers and an impact assessment with the proposal, which it hopes to see in force in 2011.