The Financial Conglomerates and Other Financial Groups Regulations 2004

Explanatory Note

(This note is not part of the Regulations)

These Regulations implement, in part, Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC, 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (“the conglomerates directive”) (OJ No. L 35 11.2.2003 p.1).

A Transposition Table setting out how the main elements of the conglomerates directive will be transposed into UK law is available from the Financial Stability and Regulatory Policy Team, HM Treasury, 1 Horse Guards Road, London SWIA 2HQ. The Transposition Table is also available on HM Treasury’s website (www.hm-treasury.gov.uk).

A full regulatory impact assessment has not been produced for this instrument as it has no impact on the costs of business.

The conglomerates directive includes certain procedural requirements that competent authorities of EEA States must carry out. These requirements include consulting other competent authorities and notifying regulated entities that, for example, they are members of financial conglomerates. These Regulations impose obligations upon the Financial Services Authority, the competent authority for the United Kingdom, for the purpose of implementing these procedural requirements.

Part 2 of the Regulations makes provision in relation to the exercise of supplementary supervision of regulated entities in a financial conglomerate. Regulation 2 deals with procedural requirements relating to the notification of identification as a financial conglomerate and choice of co-ordinator. Regulation 3 deals with procedural requirements relating to the exercise of functions under Part IV of the Financial Services and Markets Act 2000 (c. 8.) (“the Act”) for the purposes of carrying out supplementary supervision. Regulation 4 deals with procedural requirements relating to the exercise of functions under section 148 of the Act for the purposes of carrying on supplementary supervision. Regulation 5 makes provision in respect of the carrying out of consultation in the case of major sanctions or exceptional measures. Regulation 6 provides that any function carried out by the Financial Services Authority for the purposes of the conglomerates directive is to be treated as a function conferred on that Authority by a provision of the Act. Regulation 6 also applies the effect of the Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001 (S.I. 2001/1420) to any notifications given under regulation 2(1)(a) of these Regulations.

Part 3 of the Regulations makes provision in relation to the supplementary or consolidated supervision of third-country financial conglomerates and third-country groups. Regulation 8 deals with procedural requirements relating to the supervision of third-country financial conglomerates. Regulation 9 deals with procedural requirements relating to the supervision of third-country banking groups. Regulation 10 deals with procedural requirements in relation to the supervision of third-country groups subject to Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment firms and credit institutions (OJ L141 11.6.1993 p.1).

Part 4 of the Regulations makes provision relating to information. Regulation 11 amends the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001 (S.I. 2001/2188), so as to extend the effect of those Regulations to information necessary for the purposes of the conglomerates directive. Regulation 12 provides that the Financial Services Authority must, where it requires information that a regulated entity has disclosed to its competent authority, obtain that information from that competent authority.

Part 5 of the Regulations makes other miscellaneous provision. Regulation 13 amends the Financial Services and Markets Act 2000 (Consultation with Competent Authorities) Regulations 2001 (S.I. 2001/2509) so as to extend the effect of those Regulations to consultation required for the purpose of the conglomerates directive. Regulation 14 makes consequential amendments to references in UK legislation to Community legislation that is amended by the conglomerates directive. Regulation 15 extends the Financial Services Authority’s own-initiative power (within the meaning of section 45 of the Act) so as to enable it to vary a Part IV permission where it considers that this is desirable to do so for the purpose of carrying out supplementary supervision in accordance with the conglomerates directive, acting in accordance with articles 55a or 56a of Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (OJ L126, 26.5.2000, p.1) or acting in accordance with Article 8(2) or Annex I.1.B of Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance undertakings in an insurance group (OJ No. L 330 5.12.98 p.1).

Regulations 2 to 12 and 14 and 15 are made in accordance with the powers conferred on the Treasury by section 2(2) of the European Communities Act 1972 (c. 68.). Regulation 13 is made in accordance with the powers conferred on the Treasury by sections 183(2), 188(2), 417(1) and 428(3) of the Act. Regulation 1 is made in accordance with section 2(2) of the European Communities Act 1972 and sections 183(2), 188(2), 417(1) and 428(3) of the Act.