The New EU Regulatory Framework Governing the Approval and Consolidated Supervision of Financial Holding Companies and Mixed Financial Holding Companies

Abstract

In 2019, the so-called “Capital Requirements” Directive 2013/36/EU (CRD IV) was amended by virtue of Directive (EU) 2019/878 (CRD V) in respect to several aspects, including the supervision of financial holding companies and mixed financial holding companies. The new rules apply from 1 January 2021. In accordance with the considerations set out in the CRD V, the key rationale for the introduction of novel elements was to lay down a specific approval procedure and direct supervisory powers over certain financial holding companies and mixed financial holding companies in order to ensure that such holding companies can be held directly responsible for ensuring compliance with consolidated prudential requirements, without subjecting them to additional prudential requirements on an individual basis.

The following University notes, which briefly albeit systematically present the amendments inserted to the CRD IV in relation to financial holding companies and mixed financial holding companies, are structured in five Sections:

Section A discusses the initial framework and the rationale for its enhancement and provides the definition of the terms financial holding companies and mixed financial holding companies. Section B presents then the provisions of the new Article 21a on the conditions for granting approval and the related exemptions, as well as on the decisions on the approval and exemption from approval, and the related transitional provisions.

The new requirements relating to the management body and to internal arrangements, processes and mechanisms of financial holding companies and mixed financial holding companies are laid down in Section C. This is followed by Section D discussing the amendments inserted to Articles 11-118 CRD IV in relation to the principles for conducting supervision on a consolidated basis. Finally, the amendments to other related provisions of the CRD IV (including, inter alia, those on the enhanced powers of supervisory authorities, on cooperation arrangements and on the inclusion of holding companies in consolidated supervision) are discussed in Section E.

Keywords: Capital Requirements Directive (CRD), financial holding company, mixed financial holding company, supervision, supervision on a consolidated basis, national competent authorities (NCAs), European Central Bank (ECB), Single Supervisory Mechanism (SSM)

JEL Classification: E50, E58, F36, G01, G21, G28, G32, G33, K20, K23, K33, L80