Banking - CA, authorization, activities and qualifying holding

Question 1

Who are the CA’s?

Answer 1

MS designate the national CA’s - Iceland is FME for example

Question 2

Do CA’s work together?

Answer 2

Yes, the national authorities shall cooperate in order to achieve convergence of supervisory tools and practices within the EU

Question 3

CRD has articles on authorization for certain institutions, what are those institutions?

Answer 3

CI’s

Question 4

Is the CRD articles regarding authorizations also for FI’s?

Answer 4

no, thats MiFID

Question 5

If a german bank gets an authorization in its homestate what will he need to do to set up a branch in Italy?

Answer 5

He will not need a second one to set up a branch in germany

Question 6

What is the principle of mutual recognition of authorization?

Answer 6

If a CI has obtained authorization it may set up branches in other states without additional authorization

Question 7

Who grants a CI authorization?

Answer 7

The national CA (FME in iceland)

Question 8

What are the conditions for authorization?

Answer 8

Description of planned business and activities

Initial capital (5 mil eur minimum for a bank)

Management must be fit and proper -

sheareholders must be of good reputation same for the top managers

Location of the head office is where the authorization will be granted

close links must be checked in regards to the shareholders

Question 9

What are we talking about when we talk about fit and proper management?

Answer 9

Manegement must be fit and proper

At least two persons must direct the business

The management bodu must be of succicently good reputation and with sufficient knowledge and experience

Question 10

Tell me about the location of head office condition for authorization

Answer 10

Location of the office should be in the state where the registered office is or in the state which granted the authorization and in which it actually carries out its business

Question 11

What must a CI inform a CA about regarding shareholders?

Answer 11

They must be checked and CI must let know if there are shareholders that have qualifying holdings (>=10%) or where there are no qualifying holdings of the 20 largest shareholders

They must also be suitable with respect to the need to ensure sound and prudent management

Question 12

What are close links in regards to authorization?

Answer 12

Two or more natural or legal persons are linked through:
-ownership or control of 20% or more of capital or voting rights

-other control relationship

Question 13

What must a CA check in regards to close links?

Answer 13

Are there any close links between the CI and another person?

What is the nature of the close links?

Do the close links hinder effective supervision?

Question 14

When can authorization be withdrawn?

Answer 14

CI dose not use the authorization for 12 months

CI has obtained authorization through false statements

CI no longer fulfils the conditions for authorization

CI no longer meets the prudential requirements of the CRR

CI can no longer be relied on to fulfil its obligations towards creditors

CI commits certain serious breaches listed in the directive

Question 15

If a institution gets authorization is it for all or just certain activities?

Answer 15

The authorization specifies what activities are authorized. A annex in the CRD has a list of activates authorized by the home state and they are subject to mutual recognition

Question 16

CIs usually always have certain types of authorization what are they?

Answer 16

CIs can always take deposits (1)
Are also usually authorized for points 2 - 15 also. E.g. leading, money brokering and portfolio management

Question 17

What is the difference between commercial banking and investment banking?

Answer 17

Investment banking - compering fossar to like Arion

They do portfolio management and issuing of securities and stuff like that vs. commercial witch is more akin to what we think of when we think of banks. Take deposits and lending and stuff like that, but they can also be authorized to all of it as the CRD does not require segregation between the two

Question 18

What is a qualifying holding?

Answer 18

Some one that has a direct or indirect holding in an undertaking which represents 10% or more of the capital or voting rights or which makes it possible to exercise a significant influence over the management of the undertaking

Question 19

If a there is an individual that has been found to be “QH” what do you need to do?

Answer 19

There is a duty to notify the CA of existing or planned ownership of QH, planned disposal of QH or a planned increase or decrease of QH

Question 20

Who must notify of a QH?

Answer 20

The owner of QH and the CI

CI must also inform annually about existing QH

Question 21

Why do we need to verify QH?

Answer 21

So the CA can:

Ensure sound and prudent management of a CI

Assess the suitability of the proposed acquirer

assess the financial soundness of the proposed acquisition

Question 22

When dose the CA assess the notification and how regarding QH?

Answer 22

The CA assess the notification against a certain criteria within 60 working days

Question 23

If a CA is not a fan of the QH what can they do?

Answer 23

CA can oppose the oppose the plan, e.g., by suspending voting rights

Question 24

When a CA gets a notification regarding QH it assess the notification against a certain criteria, what is that criteria?

Answer 24

MS publish a list specifying the information required for the assessment

The information that would be needed would be:
information that can show the reputation of the acquirer

reputation, knowledge and experience of the proposed management body

financial soundness of the proposed acquirer

ability of the CI to continue to comply with prudential requirements

Whether there is suspicion of money laundering or terrorist financing