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Financial sector: Commission acts to improve supervisory approval process for mergers and acquisitions

Commission Européenne - IP/06/1174   12/09/2006

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IP/06/1174

Brussels, 12 September 2006

Financial sector: Commission acts to improve supervisory approval process for mergers and acquisitions

The European Commission has put forward a proposal that will tighten the procedures that Member States' supervisory authorities have to follow when assessing proposed mergers and acquisitions (M&A) in the banking, insurance and securities sectors. Current EU rules allow supervisory authorities to block proposed M&A if they consider that the 'sound and prudent management' of the target company could be put at risk. The proposed new Directive, which amends various existing Directives in these sectors, will in particular clarify the criteria against which supervisors should assess possible M&A operations. This will improve clarity and transparency in supervisory assessment and help to ensure a consistent handling of M&A requests across the EU.

Internal Market and Services Commissioner Charlie McCreevy said: "These new rules mean that supervisory authorities will have to be clear, transparent and consistent when assessing cross-border mergers and acquisitions. They leave no room for political interference or protectionism. This has to be the way forward if we're serious about having a fully functioning Internal Market and enabling Europe's financial companies to compete globally."

What the new Directive would introduce

The proposed Directive provides supervisory authorities with a clear and transparent process for decision-making and notification. In particular, there is now a closed list of criteria on which the acquiring company should be assessed, such as reputation of the proposed acquirer, reputation and experience of any person that may run the resulting institution or firm, financial soundness of the proposed acquirer, compliance with relevant EU Directives, and risk of money laundering and terrorism financing. Also, the Directive reduces the assessment period from three months to 30 days and allows the supervisory authority to 'stop the clock' only once, under clear conditions.

It amends the following existing Directives: the Banking Directive (2006/48/EC), the Third Non-life Insurance Directive (92/49/EEC), the Recast Life Assurance Directive (2002/83/EC), the Reinsurance Directive (2005/68/EC), and Directive 2006/48/EC on markets in financial instruments.

Background

The issue of low cross-border consolidation in the financial sector was discussed at the informal meeting of Economic and Finance Ministers (ECOFIN) in September 2004. Ministers asked the Commission to study possible obstacles to cross-border mergers and acquisitions in the financial sector, arising both from differing supervisory practices and from other, broader factors.

Consequently, the Commission began a review of the existing rules in the banking sector on the supervisory assessments of shareholdings that allow Member States to block on prudential grounds the acquisition of shareholdings above certain thresholds. As this legislation is very similar to corresponding legislation in the securities and insurance sectors, it was considered appropriate to extend the review to include these sectors as well, in order to maintain and enhance further cross-sectoral consistency.

To gather stakeholders' view on the subject, the Commission carried out an online consultation in spring 2006 (IP/06/320). The results indicated that EU companies were aware of the problems with the supervisory approval process, and were supportive of the need to introduce clearer procedures and criteria and to improve consistency.

More information is available at:

http://ec.europa.eu/internal_market/finances/cross-sector/index_en.htm#obstacles


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