Changes from report parliamentary committee draft to plenary report

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

▸10 unchanged paragraphs

on the proposal for a directive of the European Parliament and of the Council amending Directive 2013/36/EU as regards supervisory powers, sanctions, third-country branches, and environmental, social and governance risks, and amending Directive 2014/59/EU

(COM(2021)0663 – C90395/2021 – 2021/0341(COD))

(Ordinary legislative procedure: first reading)

The European Parliament,

– having regard to the Commission proposal to Parliament and the Council (COM(2021)0663),

– having regard to Article 294(2) and Article 53(1) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90395/2021),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

– having regard to the opinion of the European Central Bank of 27 April 2022,

– having regard to the opinion of the European Economic and Social Committee of …,

– having regard to Rule 59 of its Rules of Procedure,

Changed– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0000/2022),(A9-0029/2023),

1. Adopts its position at first reading hereinafter set out;

Added2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 1

RemovedRecital 5: (5) Concerning mergers and divisions, the Directive (EU) 2017/1132 lays down harmonised rules and procedures, in particular for cross-border mergers and divisions of limited liability companies. Therefore, the assessment procedure by the competent authorities stipulated in this directive should be complementary to the Directive (EU) 2017/1132 and should not contradict any of its provisions. In case of those cross-border mergers and divisions which fall under the scope of Directive 2017/1132, the motivated decision issued by the competent supervisory authority should be part of the assessment of the compliance with all relevant conditions and the proper completion of all procedures and formalities required for the pre-merger or pre-division certificate. The motivated decision should therefore be transferred to the designated national authority responsible for issuing the pre-merger or pre-division certificate under Directive (EU) 2017/1132.

AddedAMENDMENTS BY THE EUROPEAN PARLIAMENT*

RemovedRecital 8: (8) In order to ensure proportionality and avoid undue administrative burden, those additional powers of competent authorities should be applicable only to operations deemed material. Only operations consisting in mergers or divisions should be treated automatically as material operations, as the newly created entity can be expected to present a significantly different prudential profile from the entities initially involved in the merger or division. Also, mergers or division should not be concluded by entities undertaking them before a prior approval is received from the competent authorities. Other operations (including acquisition of holding and transfers of assets and liabilities), when considered material, should be assessed by the competent authorities based on a tacit approval procedure.

Addedto the Commission proposal

RemovedRecital 20: (20) By way of derogation, restricted only to those limited situations where the legal system of the Member State does not allow the administrative penalties provided for in this Directive, the rules on administrative penalties could be exceptionally applied in such a manner that the penalty is initiated by the competent authority and imposed by judicial authorities. Therefore, it is necessary that those Member States still ensure that the application of the rules and penalties has an effect equivalent to the administrative penalties imposed by the competent authorities. When imposing such penalties, judicial authorities should take into account the recommendation by the competent authority initiating the penalty. The penalties imposed should be effective, proportionate and dissuasive.

Added---------------------------------------------------------

RemovedRecital 32: (32) The unprecedented scale of transition towards a sustainable, climate-neutral and circular economy will have considerable impacts on the financial system. In 2018, the Network of Central Banks and Supervisors for Greening the Financial System50 acknowledged that climate-related risks are a source of financial risk. The Commission’s Renewed Sustainable Finance Strategy51 emphasises that environmental, social and governance (ESG) risks, and risks steaming from the physical impact of climate change, biodiversity loss and the broader environmental degradation of ecosystems in particular, pose an unprecedented challenge to our economies and to the stability of the financial system. Those risks present specificities such as their forward-looking nature and their distinctive impacts over short, medium and long-term time horizons. The specificity of climate-related environmental risks, both in terms of transition and physical risks, requires, in particular, that such risks be managed over a period of at least 10 years.

AddedDIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

RemovedRecital 34: (34) To maintain adequate resilience to the negative impacts of ESG factors, institutions established in the Union need to be able to systematically identify, measure and manage ESG risks, and their supervisors need to assess the risks at the level of the individual institution as well as at the systemic level, giving priority to environmental factors and progressing to the other sustainability factors as the methodologies and tools for the assessment evolve. Institutions should assess the alignment of their portfolios with the ambition of the Union to become climate-neutral by 2050 as well as avert environmental degradation and biodiversity loss. Institutions should set out specific plans to address the risks arising, in the short, medium and long term, from the misalignment of their business model and strategy with relevant policy objectives of the Union, included in the Paris Agreement, the Fit for 55 package52 [and the post-2020 Global Biodiversity Framework]. Institutions should be required to have robust governance arrangements and internal processes for the management of ESG risks and to have in place strategies approved by their management bodies that take into consideration not only the current but also the forward-looking impact of ESG factors. The collective knowledge and awareness of ESG factors by the management body and institutions’ internal capital allocation to address ESG risks will also be key to drive the change within each and single institution. The spec…

Addedamending Directive 2013/36/EU as regards supervisory powers, sanctions, third-country branches, and environmental, social and governance risks, and amending Directive 2014/59/EU

RemovedRecital 36: (36) The provisions in Article 133 of Directive 2013/36/EU on the systemic risk buffer framework may already be used to address various kinds of systemic risks, including risks related to climate change. To the extent that the relevant competent or designated authorities, as applicable, consider that risks related to climate change have the potential to have serious negative consequences for the financial system and the real economy in Member States, they should introduce a systemic risk buffer rate, which could also be applied to certain sets or subsets of exposures, for instance those subject to physical and transition risks related to climate change, where they consider the introduction of such rate effective and proportionate to mitigate those risks.

Added(Text with EEA relevance)

RemovedRecital 43: (43) The additional own funds requirement set by an institution’s competent authority in accordance with Article 104(1), point (a), of Directive 2013/36/EU to address risks other than the risk of excessive leverage should not be increased by the institution’s becoming bound by the output floor set out in Regulation (EU) No 575/2013, all else being equal. Furthermore, upon the institution becoming bound by the output floor, the competent authority should review the institution’s additional own funds requirement and assess, in particular, whether and to what extent such requirement captures risks of excessive variability or a lack of comparability of risk weights from the use of internal models by the institution. Where that is the case, the institution’s additional own funds requirement should be regarded as overlapping with the risks captured by the output floor in the own funds requirement of the institution and, consequently, the competent authority should reduce that requirement to the extent necessary to remove any such overlap for as long as the institution remains bound by the output floor.

AddedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

RemovedRecital 44: (44) Similarly, upon becoming bound by the output floor, the nominal amount of an institution’s CET1 capital required under the systemic risk buffer might increase. As a rule, competent and designated authorities, as applicable, should not impose systemic risk buffer requirements for risks which are already fully covered by the output floor, regardless of whether or not an institution is bound by the output floor.

AddedHaving regard to the Treaty on the Functioning of the European Union, and in particular Article 53(1) thereof,

RemovedRecital 45: deleted

AddedHaving regard to the proposal from the European Commission,

RemovedDirective 2013/36/EU

AddedAfter transmission of the draft legislative act to the national parliaments,

RemovedArticle 1 – paragraph 1 – point 1 – point c, Article 3 – paragraph 1 – point 9b: (9b) ‘chief financial officer’ means the person with overall responsibility for the financial resources management, financial planning and financial reporting;

AddedHaving regard to the opinion of the European Central Bank,

RemovedDirective 2013/36/EU

AddedHaving regard to the opinion of the European Economic and Social Committee,

RemovedArticle 1 – paragraph 1 – point 1 – point g, Article 3 – paragraph 1 – point 68: (68) ‘periodic penalty payments’ means daily penalties, aimed at ending ongoing breaches and compelling legal or natural person to return to compliance with their obligations under national provisions transposing this Directive, obligations under Regulation (EU) No 575/2013, or obligations arising from a decision issued by the competent authority;

AddedActing in accordance with the ordinary legislative procedure,

RemovedDirective 2013/36/EU

AddedWhereas:

Change 2

ChangedArticle(1) 1Competent –authorities, paragraphtheir 1staff –and pointmembers 2,of Articletheir 4governance –bodies paragraphshould 4be –independent subparagraphof 2:political Forand theeconomic purposesinfluence. Risks of preservingconflicts of interest undermine the independenceintegrity of competentthe authoritiesUnion infinancial system and harm the exercisegoal of theiran powers,integrated Memberbanking Statesand shallcapital markets union. Directive 2013/36/EU should provide themore necessarydetailed arrangementsprovisions for Member States to ensure that thosethe competent authorities, including their staff and members of their governance bodies, canmanagement, act independently and objectively,objectively. withoutIn seekingthis orcontext, takingminimum unilateralrequirements independentshould instructions,be fromlaid anydown governmentto ofprevent aconflicts Memberof Stateinterests orand bodyset ofstrict thelimits Unionto or“revolving fromdoors”. anyThe otherEuropean publicSupervisory orAuthority private(European body,Banking withoutAuthority) prejudice(EBA) toshould nationalissue arrangementsguidelines requiringaddressed theto competent authorities toon bethe accountableprevention toof aconflicts nationalof governmentinterests, orbased otheron publicinternational body.best practices.

Change 3

RemovedDirective 2013/36/EU

Added(1a) Amending Directive 2013/36/EU as regards supervisory powers, sanctions, third-country branches, and environmental, social and governance risks, and amending Directive 2014/59/EU should be driven in coherence with the logic of the banking union and lead to further harmonisation of the Single Market for banking. It should always ensure proportionality of the rules and aim at further reducing compliance and reporting costs, in particular for small and non-complex institutions, in line with the ‘Study of the Cost of Compliance with Supervisory Reporting Requirements’ that EBA published in 2021, which targeted a reduction of reporting costs of 10 to 20%.

RemovedArticle 1 – paragraph 1 – point 4 – point a, Article 21a – paragraph 1 – subparagraph 2: Competent authorities shall regularly review the parent undertakings of an institution, or the parent undertakings of an entity requesting an authorisation pursuant to Article 8, in order to verify whether the institution or entity requesting authorisation has correctly identified an undertaking that complies with the criteria to be considered as a parent financial holding company in a Member State, a parent mixed financial holding company in a Member State, an EU parent financial holding company or an EU parent mixed financial holding company.

Added(2) Competent authorities should have the necessary power to withdraw the authorisation granted to a credit institution where such a credit institution has been declared failing or likely to fail and, at the same time, has not met the other conditions for resolution set out by Directive 2014/59/EU of the European Parliament and of the Council or by Regulation (EU) No 806/2014 of the European Parliament and of the Council. In such a situation, a credit institution should be wound up in accordance with the applicable national insolvency proceedings, or in other types of proceedings laid down for those institutions under national law, and should therefore discontinue the activities for which the authorisation had been granted.

RemovedDirective 2013/36/EU

Added(3) The provision of banking services in the Union is conditional upon the credit institution’s having previous authorisation and a physical presence through a legal person or a branch in its territory. Only in that way credit institutions may be subject to effective prudential regulation and supervision that are necessary to minimise the risk of failure and, when it occurs, to manage that failure in order to prevent it from spreading in a disorderly manner and leading to the collapse of the financial system (contagion risk by e.g. a bank run or a bank failure triggered by imprudent lending). The provision of banking services in the Union without such physical presence would increase the presence and prevalence in the financial markets where credit institutions are closely involved of risk segments not subject to Union’s prudential regulation and supervision, that may eventually threaten the financial stability of the Union or of its individual Member States. The financial crisis of 2008-2009 is the latest historical precedent, which underlines how small market segments may become the source of significant threats to the financial stability of the Union and its Member States if left outside the scope of prudential regulation and supervision. Hence, it is necessary to lay down an explicit requirement in Union law that undertakings established in a third country and seeking to provide banking services in the Union should at least establish a branch in a Member State and that such branch be authorised in accordance with Union legislation, unless the undertaking wishes to provide banking services in the Union through a subsidiary. However, that requirement to establish a branch should not apply to cases of reverse solicitation of services, as in this case it is the customer that approaches the undertaking in the third country to solicit the provision of the service. This requirement should also not apply to cases of interbank and interdealer transactions, with the exclusion of transactions with subsidiaries, or for services provided under Directive 2014/65/EU and the accommodating ancillary services the sole purpose of which is to provide services under that Directive. Nonetheless, the exercise of such exemption should take into account compliance with the AML/CFT rules as defined in [insert reference to AMLD].

RemovedArticle 1 – paragraph 1 – point 4 – point a, Article 21a – paragraph 1 – subparagraph 3: For the purposes of the second sub-paragraph, where the parent undertakings are located in other Member States than the Member State in which the institution, or the entity requesting an authorisation pursuant to Article 8, is established, competent authorities of those two Member States shall cooperate closely to perform the review.

Added(4) Supervisors of credit institutions should have all the necessary powers that enable them to perform their duties and that cover the various operations conducted by the supervised entities. To that end and to increase the level playing field, supervisors must have at their disposal all the supervisory powers enabling them to cover material operations that can be undertaken by the supervised entities. The European Central Bank and national competent authorities should therefore be notified in case a material operation, including acquisitions by supervised entities of material holdings in financial or non-financial entities, material transfers of assets and liabilities from or to a supervised entities, and mergers and divisions involving a supervised entities, undertaken by a supervised entity raises concerns over its prudential profile, or over possible money laundering and terrorist financing activities. Furthermore, the ECB and national competent authorities should have the power to intervene in such cases.

RemovedDirective 2013/36/EU

Added(5) Concerning mergers and divisions, the Directive (EU) 2017/1132 lays down harmonised rules and procedures, in particular for cross-border mergers and divisions of limited liability companies. Therefore, the assessment procedure by the competent authorities stipulated in this directive should be complementary to the Directive (EU) 2017/1132 and should not contradict any of its provisions. In case of those cross-border mergers and divisions which fall under the scope of Directive 2017/1132, the motivated opinion issued by the competent supervisory authority should be part of the assessment of the compliance with all relevant conditions and the proper completion of all procedures and formalities required for the pre-merger or pre-division certificate. The motivated opinion should therefore be transferred to the designated national authority responsible for issuing the pre-merger or pre-division certificate under Directive (EU) 2017/1132.

RemovedArticle 1 – paragraph 1 – point 4 – point a, Article 21a – paragraph 1 – subparagraph 4: Competent authorities shall publish and regularly update a list of all identified financial holding companies and mixed financial holding companies in their Member State that are subject to approval in accordance with subparagraph 1.

Added(6) In order to ensure that competent authorities can intervene before one of these material operations is undertaken, they should be notified ex ante. That notification should be accompanied by information necessary for the competent authorities to assess the planned operation from a prudential and anti-money laundering and counter-terrorist financing perspective. That assessment by competent authorities should commence at the moment of the receipt of the notification including all the requested information and, in the case of the acquisition of a material holding or the material transfer of assets and liabilities, should be limited in time.

RemovedDirective 2013/36/EU

Added(7) In the case of the acquisition of a qualifying holding, or the material transfer of assets or liabilities, the conclusion of the assessment could lead the competent authority to decide to oppose to the operation. In the absence of opposition from the competent authorities within a given period, the operation should be deemed approved.

RemovedArticle 1 – paragraph 1 – point 4 – point b – point ii, Article 21a – paragraph 2 – subparagraph 2: Where the approval of a financial holding company or mixed financial holding company takes place concurrently with the assessment referred to in Article 22 and Article 27a, the competent authority for the purposes of that Article shall coordinate, as appropriate, with the consolidating supervisor and, where different, the competent authority in the Member State where the financial holding company or mixed financial holding company is established. In that case, the assessment period referred to in Article 22(2), second subparagraph, and Article 27a(3) shall be suspended until the procedure set out in this Article is complete.;

Added(8) In order to ensure proportionality and avoid undue administrative burden, those additional powers of competent authorities should be applicable only to operations deemed material. Only operations consisting in mergers or divisions should be treated automatically as material operations, as the newly created entity can be expected to present a significantly different prudential profile from the entities initially involved in the merger or division. Also, mergers or division should not be concluded by entities undertaking them before a prior positive opinion is received from the competent authorities. Other operations (including acquisition of holding and transfers of assets and liabilities), when considered material, should be assessed by the competent authorities based on a tacit approval procedure.