The current stage of the legal regulation of the banking system...

The current stage of the legal regulation of the EU banking system

The current stage in the development of legal regulation of banking in the EU began with the adoption of two new directives designed to change and expand the European Banking Code. This is the EU Directive of June 14, 2006 relating to the organization and conduct of business of credit institutions, and the EU Directive of June 14, 2006 on capital adequacy of investment firms and credit institutions (2006/49/EC). This Directive came into force on July 20, 2006, and now they are in effect in the Directive of September 16, 2009 (2009/111/EC). Directive No. 48 replaced the EU Directive of March 20, 2000 and currently acts as an updated version of the European Banking Code. The Directive contains the following key provisions:

1) includes the definition of a credit institution, which is understood, firstly, an enterprise whose activity consists of accepting deposits or other repayable funds from the public and issuing loans on its own behalf and at its own expense, and secondly, the electronic currency organization. At the same time, the directive emphasizes that deposits can be received only by credit institutions and no other legal or natural persons (Article 5);

2) explains that banking activities can be carried out only if the credit organization has a license, the issuance of which is subject to the following requirements:

• the authorized capital of a credit institution can not be less than € 5 million,

• at least two persons who are able to effectively conduct a banking business, have a good reputation and have sufficient professional experience (article 11, paragraph 1),

• a credit institution should disclose information about its shareholders and participants who directly or indirectly have a qualified share in the authorized capital, as well as the size of this share. The qualified share of (qualifying holding) means the direct or indirect participation in the capital of an enterprise that represents 10% or more of capital or voting rights, or participation that gives the opportunity to exercise significant influence on the management of the enterprise,


• a credit organization is entitled to obtain a license to conduct banking operations no later than 12 months from the date of submission of its application to the supervisory authority (Article 13),

• information on each issued banking license is transferred to the European Commission (Article 14);

3) contains a closed list of five grounds for the revocation of the license by the supervisory authorities of the State of origin;

4) establishes that a credit institution licensed in the territory of a member state of the EU has the right to open a branch in the territory of another Member State in a notification procedure, but the procedure for such notification differs from the one previously in effect.

Now a credit institution wishing to open a branch sends a notice to the competent supervisory authorities of the state where it was licensed. The latter within three months from the receipt of the set of documents send a notice to the competent supervisory authorities of the state in which the branch is expected to open. Within two months from the receipt of the notification, the supervisory authorities of the host State should prepare for supervisory functions over such an affiliate and, if necessary, determine the conditions for its operation. Upon receipt of notification from the supervisory authorities of the receiving State or after a two-month period, the branch may be opened and may begin its activities;

5) branches of credit institutions third countries can be opened only with the permission of the competent supervisory authorities. Information on this should be submitted to the European Commission and the European Banking Committee (the latter was established in place of the Bank Advisory Committee) (paragraph 1-2 of Article 38);

6) any natural or legal person intending to acquire a qualified share in the authorized capital of a credit institution must notify the competent supervisory authorities thereof. A similar notification must be made also when the person intends to increase his qualified share to 20.33 or 50%, or when it is a question of turning a credit institution into a subsidiary of that person;

7) a credit institution does not have the right to have a qualified share exceeding 15% of its own capital in the capital of an enterprise that is not a credit institution, financial institution or an organization that conducts concurrent banking activities, such as leasing, factoring, trust management or processing services (item 1 of item 120). The cumulative value of the above qualified shares should not exceed 60% of the size of the credit institution's own funds.

Basic legal principles for regulating the activities of banks in EU member countries:

• the principle of compulsory licensing of banking activities;

• the principle of national treatment for any credit institutions of some member states operating in the territory of other member states;

• the principle of mutual recognition of national banking licenses;

• The principle of control of the country of the institution;

• the principle of consolidated supervision of the national supervisory authorities of the state of origin for the activities of the credit institution;

• the principle of establishing uniform prudential supervision requirements for all EU credit institutions.

European Investment Bank

The European Investment Bank (EIB) was established by the Protocol of March 25, 1957 (the Protocol on the Establishment of the EIB is now an annex (Protocol No. 5) to the Consolidated Agreement).

The peculiarity of the legal status. The EIB is both an EU body and a credit institution that independently operates in financial markets (albeit without the goal of making a profit). This bank was created shortly after the conclusion of the Treaty of Rome. Its main goal was to promote a balanced and sustainable development of the Common Market of the European Community; its operations are carried out by using its own resources in the capital markets.

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