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Financial services
Financial Conglomerates Directive (FiCOD)
The Financial Conglomerates Directive (2002) introduced specific legislation for the prudential supervision of financial groups that provide cross-sectoral services. Typically, these are large financial groups undertaking both insurance and banking services.
The main objectives of the Directive are to:
- Ensure that financial conglomerates are adequately capitalised, preventing the same capital being counted twice over and so used simultaneously as a buffer against risk in different entities;
- Introduce methods for calculating a conglomerate's overall solvency position; and
- Provide for the establishment of a single lead regulator for financial conglomerates, rather than multiple lead regulators
In August 2010, as part of the Commission’s ongoing programme of reform following the financial crisis, a formal proposal was made to revise the existing rules for financial conglomerates. Due to their size, financial conglomerates are more complex and present a source of potential systemic risk. The implementation of the Financial Conglomerates Directive had also resulted in gaps in the supervisory tools of regulators. In practice, many supervisors have had to choose whether to apply insurance or banking supervision to financial groups.
Under the new proposals:
- Both insurance and banking supervision will apply to financial conglomerates;
- Risk-based assessments will help supervisors identify financial conglomerates and apply supplementary supervision if required;
- Waivers from supplementary supervision will be applicable to small firms that clearly do not pose systemic risk (with a total asset base of less than €60bn).
The European Commission’s proposal to revise rules relating to financial conglomerates is available here:
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