New EU M&A Framework In The Banking, Insurance And Investment Sectors

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The qualification and background of the shareholders of regulated financial services providers (such as credit institutions, insurance undertakings and investment firms), their commercial and strategic aims and the quality and source of the funds available to them for acquisition or for injection into an Austrian regulated institution has always been of interest for supervisors.

With a view to putting potential acquirers on an equal footing by harmonizing procedural aspects and substantive criteria, the European Commission, following up on previous attempts of convergence made by the CEBS (the banking sector Level 3 Committee) and CEIOPS (the insurance sector Level 3 Committee), has drawn up a new directive intended to uniformly cover the regulatory aspects of M&A transactions in the banking, insurance and investment firm sectors. Austrian implementing legislation entered into force on 1 April 2009.

EU framework

Based on ECOFIN considerations, the European Commission mandated CEBS and CEIPOS with calls for technical advice in 2005. It became obvious that the focus of the work on the EU level lay with the precise determination of criteria as to what would constitute the sound and prudent management of a credit institution/ insurance undertaking. Other areas of interest included the mutual recognition of decisions taken by EU supervisory authorities, the thresholds triggering notification/supervisory action and enhanced transparency in circumstances where authorities chose to formally oppose the proposed acquisition. CEBS proposed a set of substantive criteria that appeared well known from established supervisory practice (fit and proper test), but was more reluctant about automatic mutual recognition, changing the thresholds or the publication of negative decisions (refusals). Further legislative action was characterised by an extension of the new framework to the banking, insurance and investment firm sectors and by joint participation of the 3L3 Committees in the decision making process.

Directive 2007/44/EC (amending Directives 2006/48/EC, 2004/39/EC, 92/49/EC, 2002/83/EC and 2005/68/EC) entered into force on 21 September 2007. Whereas according to ECOFIN, the Banking Advisory Committee and the Commission, the new framework had been intended to prevent...