Roundtable on the Review of the FCD

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Roundtable on the Review of the FCD
The Scope of the Financial Conglomerates
Directive
Jitka Svobodová CNB, Financial Market Regulation
Division Brussels, 8 September 2008
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Supervision over the financial market in Czech
Republic

• Since 1 April 2006 the supervision has been
  integrated into the Czech National Bank
• The CNB performs supervision of the banking
  sector, the capital market, the insurance
  industry, pension funds, credit unions and
  electronic money institutions, regulated markets,
  as well as foreign exchange supervision
• The CNB approves bond issuance conditions and
  securities prospectuses and grants consents to
  takeover bid announcements and squeeze-outs
• At the end of 2007, the CNB was supervising a
  total of 23 banks and building societies, 19
  credit unions, 34 insurance companies, 10 pension
  funds, 21 depositories, 121 open-end mutual
  funds, 31 non-bank investment firms and almost
  3,000 non-bank foreign exchange entities

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Supervision at the level of the financial
conglomerate

• The CNB
• the coordinator - Petr Kellner (PPF)
• a relevant competent authority - Erste Bank, RZB
  UNIQA, Wüstenrot, Wüstenrot und
  Württembergische Group and Generali

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Financial conglomerate Petr Kellner (PPF)

• The insurance-led financial conglomerate
  qualified in 2006
• A natural person as a mixed financial holding
  company at the head of the group
• Several sub-conglomerates with mixed financial
  holding companies at the head of subgroups

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The scope of the capital adequacy calculation

• All of MFHCs included in the scope of the
  calculation
• In the case of insurance-led financial
  conglomerates solvency requirements for insurance
  undertaking should be used
• none technical provisions - the required solvency
  margins zero
• The CNB practical approach
• MFHCs should be in all cases treated as an entity
  from the banking sector the banking regulation
  is more appropriate to the character of MFHCs

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PPF after the business combination with Generali

• Remains in control of banks and financial
  institutions
• Retains its participation in the holding company
  which controls insurance undertakings, investment
  firms and financial institutions (insurance
  activities are more significant)
• The holding company and its subsidiaries are
  parts of a different financial conglomerate
• The parent undertaking its subsidiaries from
  the banking sector the holding company in which
  the parent undertaking holds a participation
• A financial conglomerate or a group of a
  financial holding company?
• Key characteristics

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Threshold for FCs already subject to
supplementary supervision

• Art. 3(6) of FCD - for the following three years
• A lower ratio of 35 and 8 respectively
  (instead of 40 and 10 )
• A lower figure of EUR 5 billion (instead of EUR 6
  billion)
• to avoid sudden regime shifts
• An insurance holding company a mixed
  financial holding company (at the head of the
  insurance-led sub-conglomerate)
• An insurance holding company a
  mixed-activity insurance holding company

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A convenient approach?

• To take also into consideration intended changes
  in the sub-group structure before ceasing the
  supplementary supervision on the financial
  conglomerate level
• The following three years could be the
  appropriate period for the clarification of the
  character of the holding company
• The balance between effectiveness and flexibility
  in the application of FCD could be preserved

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Thank you for your attention