New Rules for Overseeing Large Financial Groups to Better Protect People’s Money

Summary of the Directive on Supplementary Supervision of Financial Conglomerates

1. Purpose

• The Directive replaces and simplifies many earlier rules that have been amended many times.
• It brings together all the rules that apply to credit institutions, insurance or reinsurance companies, investment firms, asset‑management companies and alternative investment fund managers that are part of a financial conglomerate.
• The goal is to make EU law clearer, easier to find and to give citizens better access to their rights.

2. Scope

• Applies to any regulated entity that has been authorised under EU rules (banking, insurance, investment, etc.) and is part of a financial conglomerate.
• A financial conglomerate is a group where at least one regulated entity is at the top or is a key part of the group, and where the group has significant activities in at least two of the following sectors: banking, insurance, investment services.
• The Directive also covers asset‑management companies and alternative investment fund managers when they are part of such a group.

3. Key Definitions

• Credit institution, insurance undertaking, reinsurance undertaking, investment firm, asset‑management company, alternative investment fund manager – defined in existing EU rules.
• Financial sector – banking, insurance, investment services.
• Parent and subsidiary undertakings – as defined in EU company law.
• Group – a parent, its subsidiaries and any entities it owns or controls.
• Financial conglomerate – a group that meets the conditions above.
• Mixed financial holding company – a non‑regulated parent that owns a regulated entity in the EU and has other subsidiaries.

4. Thresholds for Identifying a Conglomerate

• Financial‑sector concentration: The ratio of the group’s balance‑sheet total for regulated and non‑regulated financial entities to the group’s total balance sheet must be > 40 %.
• Sectoral significance: For each sector, the average of (a) the sector’s balance‑sheet total to the group’s total for that sector and (b) the sector’s solvency requirement to the group’s total solvency requirement must be > 10 %.
• Cross‑sectoral activity: If the smallest sector’s balance‑sheet total is > €6 billion, the group is automatically a conglomerate.
• If the thresholds are not met, authorities may decide not to treat the group as a conglomerate, but must inform other authorities and usually publish the decision.

5. Supplementary Supervision

• Capital adequacy: The group must hold own funds that cover the sum of the solvency requirements of all its regulated entities. Two calculation methods are allowed:

1. Accounting consolidation – use the group’s consolidated accounts.
2. Deduction and aggregation – sum each entity’s own funds and subtract its solvency requirement.

• Risk concentration: The group must report significant concentrations of credit, market, insurance or other risks.
• Intra‑group transactions: Transactions between group entities that are significant (≥ 5 % of the group’s capital adequacy requirement) must be reported.
• Internal controls: The group must have governance, risk‑management and internal‑control systems that cover the whole group.

6. Roles and Coordination

• Coordinator: A single competent authority (usually the one that authorised the top regulated entity) coordinates all supplementary supervision.
• Relevant competent authorities: Authorities that supervise the regulated entities in the group.
• The coordinator gathers information, assesses the group’s financial position, plans supervisory actions, and can request additional information from other authorities.
• The Joint Committee of the European Supervisory Authorities (EBA, EIOPA, ESMA) issues common guidelines to harmonise practices.

7. Third‑Country Entities

• If a regulated entity’s parent is in a third country, the EU authorities must verify that the third‑country regulator provides equivalent supervision.
• Where no equivalent supervision exists, the EU may require the creation of a mixed financial holding company in the EU to bring the group under EU rules.

8. Reporting and Information Exchange

• All relevant information (legal structure, governance, financial data, risk concentrations, intra‑group transactions) must be shared among the coordinator, other competent authorities, and the Joint Committee.
• From 10 January 2030, regulated entities must also submit this information to the European Single Access Point (ESAP) in a machine‑readable format.

9. Enforcement

• If a group fails to meet capital adequacy, risk concentration or intra‑group transaction requirements, the coordinator can require corrective actions.
• The EU can impose penalties on mixed financial holding companies or their managers if they breach the Directive.

10. Implementation

• The Directive replaces Directive 2002/87/EC and its amendments.
• Member States must transpose the Directive into national law by the dates listed in Annex B (e.g., 31 December 2013 for most provisions).
• The Directive enters into force 20 days after publication in the Official Journal.

This summary captures the main points of the Directive while keeping all key numbers and data.