A proposed change to the Dutch regime for Group Finance Companies (“GFCs”) would require a number of GFCs to apply for a banking licence. The change is part of the proposed 2015 Financial Markets Amendment Act (the “Draft Act”), which would come into force on 1 January 2015. Public consultation for the Draft Act has ended. De Brauw and a few other leading law firms participated in the consultation with the aim to safeguard the banking licence exception for GFCs. Our response can be found here.
Current regulatory regime
The EU banking directives contain a licence obligation for banks with a seat in the Netherlands. In addition, there is a prohibition on attracting repayable funds from the public in the Netherlands, regardless of the use of that funding.
The Financial Markets Supervision Act currently provides an exception from the banking licence requirement and the prohibition available to GFCs (i) attracting repayable funds through the offering of securities, and (ii) extending (i.e. on lending) at least 95% of the funds attracted from the public to group companies, provided that certain other requirements are met, notably relating to a guarantee of the GFC’s obligations.
The most sweeping of the proposed amendments are:
- The exception is not available if 5% or more of the funds obtained from the public, is extended (on lent) outside the group. It is not relevant which entity extends (on lends) the funds to borrowers outside the group. This may be the GFC, but it may also be another group entity. In both situations, funds may be extended outside of the group only if this stays below the 5% threshold.
- The exception is not available if one or more group companies extend funds outside the group acting in a commercial capacity (e.g. a bank). It is unclear whether the Draft Act indeed intends to prohibit GFCs from being part of a group that also includes a bank, even if that bank were not to provide credit in an amount equalling 5% or more of the funds obtained by the GFC.
If enacted as proposed, the new regime will apply to the attracting of funds after the Draft Act enters into effect. There should be no impact on prior transactions.
A GFC that only attracts funds from PMPs would not fall within the scope of the banking licence requirement or the prohibition on attracting repayable funds and would not need to rely on the exception. However, a GFC that obtains funds from the public after the Draft Act enters into effect will need a banking licence if it does not meet the new requirements.