Financial conglomerates are large financial groups which provide services and products in at least the banking / investment and insurance sectors of the financial market place. The Financial Conglomerates Directive (FICOD), which was adopted in December 2002 and amended in 2011, aims at identifying and managing risks that are inherent to these groups that are active in several financial sectors to ensure financial stability. The FICOD therefore focuses on the so-called “group risks” – i.e. potential risks of multiple gearing and excessive leveraging of capital, risks of contagion, risks related to management complexity, risk concentration and conflicts of interest.
The FICOD does not replace the existing supervision of the different, regulated sectoral parts of a financial conglomerate (banks and investment firms, asset management companies, alternative investment fund managers, and insurance and reinsurance undertakings) but introduces a layer of supplementary supervision of the regulated entities in the group on top of the sectoral legislation.
The European Commission has now published a consultation document seeking evidence on the FICOD and its implementation to date (including regulatory technical standards), as part of the evaluations that it is carrying out under its Regulatory Fitness and Performance Programme.
The evaluation is looking at whether the current FICOD regulatory framework is proportionate and fit for purpose, and delivering on its objective to identify and manage group risks, and in particular whether the FICOD has:
- contributed to enhanced financial stability;
- safeguarded creditors’ and policyholders’ interests; and
- promoted the competitiveness of financial conglomerates within the EU and at international level.
However, the evaluation will not consider possible future changes to the legislation. If this is required it will be done in a separate impact assessment.
The deadline for comments on the consultation is 20 September 2016.