The Financial Conglomerates and Other Financial Groups Regulations 2004

PART 3 Supplementary supervision of third-country financial conglomeratesand third-country groups

Supervision of third-country financial conglomerates and third-country groups—interpretation

7.—(1) For the purposes of this Part—

“asset management company” means—

(a)

any EEA firm falling within paragraph 5(f) of Schedule 3 to the Act(1); or

(b)

any UK firm whose EEA right derives from the UCITS directive;

“credit institution” means—

(a)

any EEA firm falling within paragraph 5(b) of Schedule 3 to the Act; or

(b)

any UK firm whose EEA right derives from the banking consolidation directive;

“investment firm” means—

(a)

any EEA firm falling within paragraph 5(a) of Schedule 3 to the Act; or

(b)

any UK firm whose EEA right derives from the investment services directive;

“third-country competent authority” means the authority of a country or territory which is not an EEA State which is empowered by law or regulation to supervise (whether on an individual or group-wide basis) regulated entities;

“third-country financial conglomerate” means a group—

(a)

which, subject to Article 3 of the conglomerates directive, meets the conditions in Article 2(14) of that directive, and

(b)

in which the parent undertaking has its head office outside the EEA;

“third-country group” means a group of which the parent undertaking has its head office outside the EEA.

(2) For the purposes of this Part a regulated entity is in a third-country group if the parent undertaking of the group in which it is a member has its head office outside the EEA.

Supervision of third-country financial conglomerates

8.—(1) Where the Authority is, for the purposes of Article 18(1) of the conglomerates directive (parent undertakings outside the Community), verifying whether the regulated entities in a third-country financial conglomerate are subject to supervision, by a third-country competent authority, which is equivalent to that provided for by the provisions of the conglomerates directive, it must, where there is a directive requirement to do so, before completing this verification—

(a) consult the other relevant competent authorities in relation to that third-county financial conglomerate;

(b) consult the Financial Conglomerates Committee for the purposes of obtaining any applicable guidance prepared by that Committee in accordance with Article 21(5) of the conglomerates directive (guidance on whether third-country competent authorities are likely to achieve objectives of supplementary supervision); and

(c) take into account any such guidance.

(2) Paragraphs (3) and (4) apply if the Authority, for the purposes of Article 18(3) of the conglomerates directive (application of other methods for the purposes of ensuring appropriate supplementary supervision of the regulated entities in a third-country financial conglomerate), exercises its powers to—

(a) vary the Part IV permission of a regulated entity in a third-country financial conglomerate;

(b) disapply from, or apply in a modified form to, such a regulated entity the rules specified in subsection (1) of section 148 of the Act (modification or waiver of rules) in accordance with that section;

(c) impose conditions under section 185 of the Act (conditions attached to approval of change of control) on a person who is, or proposes to be, a controller of such a regulated entity; or

(d) give a notice under section 186 or 187 of the Act (notice of objection to acquisition of, or existing, control) to a person who is, or proposes to be, a controller of such a regulated entity.

(3) Where there is a directive requirement to do so, the Authority must before taking the action specified in paragraph (2)—

(a) where the Authority is the co-ordinator, consult the relevant competent authorities in relation to that third-country financial conglomerate; or

(b) where the Authority is not the co-ordinator, obtain the consent of the co-ordinator for that third-country financial conglomerate to take that action.

(4) If the Authority decides to take that action, it must, where there is a directive requirement to do so, notify—

(a) the competent authority of each regulated entity in that third-country financial conglomerate, and

(b) the Commission,

that it has done so.

Supervision of third-country banking groups

9.—(1) Where the Authority is, for the purposes of Article 56a of the banking consolidation directive (third-country parent undertakings), verifying whether a credit institution in a third-country group is subject to supervision by a third-country competent authority which is equivalent to that governed by the principles laid down in Article 52 of that directive (supervision on a consolidated basis of credit institutions), it must, where there is a directive requirement to do so, before completing this verification—

(a) consult any competent authority which supervises a credit institution in that third-country group;

(b) consult the Banking Advisory Committee for the purposes of obtaining any applicable guidance prepared by that Committee in accordance with the second paragraph of Article 56a of that directive; and

(c) take into account any such guidance.

(2) Paragraphs (3) and (4) apply if the Authority exercises, for the purposes of the fifth paragraph of Article 56a of the banking consolidation directive, its powers to—

(a) vary the Part IV permission of a credit institution in a third-country group;

(b) disapply from, or apply in modified form to, such a credit institution, the rules specified in subsection (1) of section 148 of the Act in accordance with that section;

(c) impose conditions under section 185 of the Act on a person who is, or proposes to be, a controller of such a credit institution; or

(d) give a notice under section 186 or 187 of the Act to a person who is, or proposes to be, a controller of such a credit institution.

(3) Where there is a directive requirement to do so, the Authority must before exercising its powers to take the action specified in paragraph (2)—

(a) where the Authority would be responsible for supervising that third-country group for the purposes of Article 53 of the banking consolidation directive (competent authorities responsible for exercising supervision on a consolidated basis) if alternative techniques were not applied, consult the competent authorities which are involved in the supervision of any of the credit institutions in that third-country group; and

(b) where the Authority would not be so responsible, obtain the consent of the competent authority which would be responsible for supervising that third-country group for the purposes of Article 53 of the banking consolidation directive if alternative techniques were not applied.

(4) If the Authority decides to take that action, it must, where there is a directive requirement to do so, notify—

(a) any competent authority which supervises a credit institution in that third-country group; and

(b) the Commission,

that it has done so.

(5) Where the Authority has, for the purposes of Article 30 of the conglomerates directive (asset management companies), included an asset management company in the scope of supervision of a credit institution in a third-country group, each reference in this regulation to a “credit institution” is to be treated as including a reference to that asset management company.

Supervision of third-country groups subject to the capital adequacy directive

10.—(1) Paragraph (2) applies if—

(a) the Authority is, for the purposes of Article 56a of the banking consolidation directive, as applied by Article 7(2) of the capital adequacy directive (groups containing both credit institutions and investment firms), verifying whether a credit institution or an investment firm in a third-country group is subject to supervision by a third-country competent authority which is equivalent to that governed by the principles laid down in Article 7(2) of the capital adequacy directive; or

(b) the Authority is, for the purposes of Article 56a of the banking consolidation directive, as applied by Article 7(3) of the capital adequacy directive (groups containing investment firms but no credit institutions), verifying whether an investment firm in a third-country group is subject to supervision, by a third-country competent authority, which is equivalent to that governed by the principles laid down in Article 7(3) of the capital adequacy directive.

(2) The Authority must, where there is a directive requirement to do so, before completing the verification referred to in paragraph (1)—

(a) consult any competent authority which supervises an investment firm or a credit institution (if any) in that third-country group;

(b) consult the Banking Advisory Committee for the purposes of obtaining any applicable guidance prepared by that Committee in accordance with the second paragraph of Article 56a of that directive; and

(c) take into account any such guidance.

(3) Paragraphs (4) and (5) apply if the Authority exercises, for the purposes of the fifth paragraph of Article 56a of the banking consolidation directive as applied by Article 7 of the capital adequacy directive, its powers to—

(a) vary the Part IV permission of an investment firm or credit institution in a third-country group;

(b) disapply from or apply in modified form to, such an investment firm or credit institution the rules specified in subsection (1) of section 148 of the Act in accordance with that section;

(c) impose conditions under section 185 of the Act on a person who is, or proposes to be, a controller of such an investment firm or credit institution; or

(d) give a notice under section 186 or 187 of the Act to a person who is, or proposes to be, a controller of such an investment firm or credit institution.

(4) Where there is a directive requirement to do so, the Authority must, before exercising its powers to take the action specified in paragraph (3)—

(a) where the Authority would be responsible for supervision of that third-country group for the purposes of Article 53 of the banking consolidation directive, as applied by article 7 of the capital adequacy directive, if alternative techniques were not applied, consult the competent authorities which are involved in the supervision of any of the investment firms or credit institutions (if any) in that third-country group; and

(b) where the Authority would not be so responsible, obtain the consent of the competent authority which would be responsible for supervision of that third-country group for the purposes of Article 53 of the banking consolidation directive, as applied by Article 7 of the capital adequacy directive, if alternative techniques were not applied.

(5) If the Authority decides to take that action, it must, where there is a directive requirement to do so, notify—

(a) any competent authority which supervises an investment firm or a credit institution (if any) in that third-country group; and

(b) the Commission,

that it has done so.

(6) If the Authority has, for the purposes of Article 30 of the conglomerates directive, included an asset management company in the scope of supervision of—

(a) credit institutions and investment firms in a third-country group; or

(b) investment firms in a third-country group,

each reference in this regulation to an “investment firm” is to be treated as including a reference to that asset management company.

(1)

Paragraph 5 of Schedule 3 was amended by S.I. 2000/2952, S.I. 2003/1473 and S.I. 2003/2066.