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Document 32013L0036

Banks and investment firms — prudential supervision

Banks and investment firms — prudential supervision

 

SUMMARY OF:

Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms

Directive (EU) 2019/878 amending Directive 2013/36/EU as regards exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers and capital conservation measures

Directive (EU) 2019/2034 on the prudential supervision of investment firms and amending Directive 2013/36/EU

WHAT IS THE AIM OF THE DIRECTIVE?

  • This capital requirements directive (‘CRD IV’) governs access to deposit taking by banks and investment firms.
  • It also covers:
    • supervisory powers and tools for the prudential supervision of institutions by competent authorities;
    • the prudential supervision of institutions by competent authorities; and
    • publication requirements for competent authorities regarding prudential regulation and supervision of institutions.
  • It replaces the former capital requirements directives (2006/48/EC and 2006/49/EC) and covers aspects previously dealt with by those directives, including:
    • access to the taking up and pursuit of the business of banks;
    • the conditions for freedom of establishment; and
    • the freedom to provide services.
  • Directive 2013/36/EU was amended by Directive (EU) 2019/878 as part of a legislative package designed to reduce risks in the financial sector and ensure its ability to withstand potential shocks.
  • Directive 2013/36/EU was further amended by Directive (EU) 2019/2034 to establish a proportionate and risk-based European prudential framework for investment firms.

KEY POINTS

The directive covers a number of new aspects in addition to those covered by the previous capital requirements directives.

  • Staff bonuses. To prevent banks from giving their staff bonuses which encourage them to take excessive risks, the directive provides for a maximum ratio between fixed pay and bonuses for all relevant staff. The bonus cannot exceed the identified staff member’s annual fixed pay, although under certain conditions, shareholders can decide to allow bonuses of up to twice the fixed pay. The new rules also include requirements on bonuses that promote a long-term approach to risk-taking.
  • Better governance and more transparency. The directive introduces rules to ensure effective oversight by the banks’ management bodies and to improve risk management. More diversity in board members is required in order to improve effective oversight. From January 2015, banks have to disclose certain information on a country-by-country basis, including their profits, taxes and public subsidies received.
  • Additional capital to be held by banks. The directive provides for more capital requirements in addition to those in the capital requirements regulation (CRR). These include capital buffers, which aim to protect a bank’s capital by setting safeguards and limits on the amount of dividend and bonus payments a bank can make. Depending on the extent to which a bank uses up its buffer, the limits become stricter, thus preventing erosion of a bank’s capital.
  • Reduced reliance on external ratings. The directive reduces, where possible, reliance by financial institutions on external credit ratings. For example, it requires that all banks’ investment decisions are based not only on ratings but also on their own internal credit opinion.

Main amendments to Directive 2013/36/EU

  • Amending Directive (EU) 2019/878 amends some of the existing articles of Directive 2013/36/EU and adds new ones concerning exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers, and capital conservation measures.
  • Amending Directive (EU) 2019/2034 is part of a new regulatory framework for investment firms which, until its adoption, had been subject to the same capital, liquidity and risk management rules as banks. It lays down prudential requirements and supervisory measures adapted to the risk profile and business model of investment firms while safeguarding financial stability.

Implementing and delegated acts

The CRR/CRD IV package allows for the adoption of delegated and implementing acts. These offer guidance on compliance with the package to the relevant national authorities, and banks and investment firms.

FROM WHEN DOES THE DIRECTIVE APPLY?

  • Directive 2013/36/EU has applied since 17 July 2013 and had to become law in the EU countries by 31 December 2013.
  • Amending Directive (EU) 2019/878 has to become law in the EU countries by 28 December 2020. EU countries must apply the rules of Directive (EU) 2019/878 as of 29 December 2020.
  • Amending Directive (EU) 2019/2034 has to become law in the EU countries by 26 June 2021, except for the rules for providing services on the client’s initiative which have applied from 26 March 2020.

BACKGROUND

Directive 2013/36/EU is part of a package of legislation that seeks to strengthen the resilience of the EU banking sector following the financial crisis in 2008. The package also includes Regulation (EU) No 575/2013, the capital requirements regulation (CRR) (see summary), which sets outs the supervisory requirements that banks need to meet.

MAIN DOCUMENTS

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, pp. 338-436)

Successive amendments and corrections to Directive 2013/36/EU have been incorporated into the basic text. This consolidated version is for reference only.

Directive (EU) 2019/878 of the European Parliament and of the Council of 20 May 2019 amending Directive 2013/36/EU as regards exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers and capital conservation measures (OJ L 150, 7.6.2019, pp. 253-295)

Corrigendum to Directive (EU) 2019/878 of the European Parliament and of the Council of 20 May 2019 amending Directive 2013/36/EU as regards exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers and capital conservation measures (OJ L 212, 3.7.2020, pp. 20-21)

Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (OJ L 314, 5.12.2019, pp. 64-114)

RELATED DOCUMENTS

Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, pp. 1-59)

See consolidated version.

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, pp. 1-337)

See consolidated version.

last update 06.08.2020

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