Council Directive 93/6/EEC (repealed)Show full title

Council Directive 93/6/EEC

of 15 March 1993

on the capital adequacy of investments firms and credit institutions (repealed)

THE COUNCIL OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Economic Community, and in particular the first and third sentences of Article 57 (2) thereof,

Having regard to the proposal from the Commission(1),

In cooperation with the European Parliament(2),

Having regard to the opinion of the Economic and Social Committee(3),

Whereas the main objective of Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field(4) is to allow investment firms authorized by the competent authorities of their home Member States and supervised by the same authorities to establish branches and provide services freely in other Member States; whereas that Directive accordingly provides for the coordination of the rules governing the authorization and pursuit of the business of investment firms;

Whereas that Directive does not, however, establish common standards for the own funds of investment firms nor indeed does it establish the amounts of the initial capital of such firms; whereas it does not establish a common framework for monitoring the risks incurred by the same firms; whereas it refers, in several of its provisions, to another Community initiative, the objective of which would be precisely to adopt coordinated measures in those fields;

Whereas the approach that has been adopted is to effect only the essential harmonization that is necessary and sufficient to secure the mutual recognition of authorization and of prudential supervision systems; whereas the adoption of measures to coordinate the definition of the own funds of investment firms, the establishment of the amounts of their initial capital and the establishment of a common framework for monitoring the risks incurred by investment firms are essential aspects of the harmonization necessary for the achievement of mutual recognition within the framework of the internal financial market;

Whereas it is appropriate to establish different amounts of initial capital depending on the range of activities that investment firms are authorized to undertake;

Whereas existing investment firms should be permitted, under certain conditions, to continue their business even if they do not comply with the minimum amount of initial capital fixed for new firms;

Whereas the Member States may also establish rules stricter than those provided for in this Directive;

Whereas this Directive forms part of the wider international effort to bring about approximation of the rules in force regarding the supervision of investment firms and credit institutions (hereinafter referred to collectively as ‘institutions’);

Whereas common basic standards for the own funds of institutions are a key feature in an internal market in the investment services sector, since own funds serve to ensure the continuity of institutions and to protect investors;

Whereas in a common financial market, institutions, whether they are investment firms or credit institutions, engage in direct competition with one another;

Whereas it is therefore desirable to achieve equality in the treatment of credit institutions and investment firms;

Whereas, as regards credit institutions, common standards are already established for the supervision and monitoring of credit risks in Council Directive 89/647/EEC of 18 December 1989 on a solvency ratio for credit institutions(5);

Whereas it is necessary to develop common standards for market risks incurred by credit institutions and provide a complementary framework for the supervision of the risks incurred by institutions, in particular market risks, and more especially position risks, counterparty/settlement risks and foreign-exchange risks;

Whereas it is necessary to introduce the concept of a ‘trading book’ comprising positions in securities and other financial instruments which are held for trading purposes and are subject mainly to market risks and exposures relating to certain financial services provided to customers;

Whereas it is desirable that institutions with negligible trading-book business, in both absolute and relative terms, should be able to apply Directive 89/647/EEC, rather than the requirements imposed in Annexes I and II to this Directive;

Whereas it is important that monitoring of settlement/delivery risks should take account of the existence of systems offering adequate protection that reduces that risk;

Whereas, in any case, institutions must comply with this Directive as regards the coverage of the foreign-exchange risks on their overall business; whereas lower capital requirements should be imposed for positions in closely correlated currencies, whether statistically confirmed or arising out of binding intergovernmental agreements, with a view in particular to the creation of the European Monetary Union;

Whereas the existence, in all institutions, of internal systems for monitoring and controlling interest-rate risks on all of their business is a particularly important way of minimizing such risks; whereas, consequently, such systems must be subject to overview by the competent authorities;

Whereas Council Directive 92/121/EEC of 21 December 1992 on the monitoring and control of large exposures of credit institutions(6) is not aimed at establishing common rules for monitoring large exposures in activities which are principally subject to market risks; whereas that Directive makes reference to another Community initiative intended to adopt the requisite coordination of methods in that field;

Whereas it is necessary to adopt common rules for the monitoring and control of large exposures incurred by investment firms;

Whereas the own funds of credit institutions have already been defined in Council Directive 89/299/EEC of 17 April 1989 on the own funds of credit institutions(7);

Whereas the basis for the definition of the own funds of institutions should be that definition;

Whereas, however, there are reasons why for the purposes of this Directive the definition of the own funds of institutions may differ from that in the aforementioned Directive in order to take account of the particular characteristics of the activities carried on by those institutions which mainly involve market risks;

Whereas Council Directive 92/30/EEC of 6 April 1992 on the supervision of credit institutions on a consolidated basis(8) states the principle of consolidation; whereas it does not establish common rules for the consolidation of financial institutions which are involved in activities principally subject to market risks; whereas that Directive makes reference to another Community initiative intended to adopt coordinated measures in that field;

Whereas Directive 92/30/EEC does not apply to groups which include one or more investment firms but no credit institutions; whereas it was, however, felt desirable to provide a common framework for the introduction of the supervision of investment firms on a consolidated basis;

Whereas technical adaptations to the detailed rules laid down in this Directive may from time to time be necessary to take account of new developments in the investment services field; whereas the Commission will accordingly propose such adaptations as are necessary;

Whereas the Council should, at a later stage, adopt provision for the adaptation of this Directive to technical progress in accordance with Council Decision 87/373/EEC of 13 July 1987 laying down the procedures for the exercise of implementing powers conferred on the Commission(9); whereas meanwhile the Council itself, on a proposal from the Commission, should carry out such adaptations;

Whereas provision should be made for the review of this Directive within three years of the date of its application in the light of experience, developments on financial markets and work in international fora of regulatory authorities; whereas that review should also include the possible review of the list of areas that may be subject to technical adjustment;

Whereas this Directive and Directive 93/22/EEC on investment services in the securities field are so closely interrelated that their entry into force on different dates could lead to the distortion of competition,

HAS ADOPTED THIS DIRECTIVE:

(1)

OJ No C 152, 21. 6. 1990, p. 6; and

OJ No C 50, 25. 2. 1992, p. 5.

(2)

OJ No C 326, 16. 12. 1991, p. 89; and

OJ No C 337, 21. 12. 1992, p. 114.

(3)

OJ No C 69, 18. 3. 1991, p. 1.

(4)

See page 27 of this Official Journal.

(5)

OJ No L 386, 30. 12. 1989, p. 14. Directive as amended by Directive 92/30/EEC (OJ No L 110, 28. 4. 1992, p. 52).

(6)

OJ No L 29, 5. 2. 1993, p. 1.

(7)

OJ No L 124, 5. 5. 1989, p. 16. Directive as last amended by Directive 92/30/EEC (OJ No L 110, 24. 9. 1992, p. 52).

(8)

OJ No L 110, 28. 4. 1992, p. 52.

(9)

OJ No L 197, 18. 7. 1987, p. 33.