Report from the Commission to the European Parliament and the Council. Legal obstacles to the free movement of funds between institutions within a single liquidity sub-group

Regulation (EU) No 575/2013 ("CRR") and Directive 2013/36/EU ("CRD") form the legal framework governing the access to the activity and the supervisory framework and prudential rules for credit institutions and investment firms (referred to collectively as "institutions").

CRR contains the prudential requirements for institutions that relate to the functioning of banking and financial services markets. The objective is to ensure the financial stability of operators on those markets as well as achieve a high level of protection for investors and depositors. In order to avoid market distortions and regulatory arbitrage, these prudential requirements should ensure a very high level of harmonisation.

However, several options and discretions remain available to national competent authorities and Member States. These include the possibility under Article 8 CRR for competent authorities to waive liquidity requirements on an individual basis. Whilst the waiver is subject to national discretion, it will greatly facilitate the application of the new liquidity rules in a group context.

According to Article 8 CRR, the competent authorities may waive in full or in part the application of Part Six of CRR, i.e. the liquidity requirements, to an institution and to all or some of its subsidiaries in the Union and supervise them as a single liquidity sub-group ("SLSG"), so long as they fulfil all stated conditions.

Those conditions are:
(a) the parent institution on a consolidated basis or a subsidiary institution on a sub-consolidated basis complies with the obligations laid down in Part Six;
(b) the parent institution on a consolidated basis or the subsidiary institution on a sub-consolidated basis monitors and has oversight at all times over the liquidity positions of all institutions within the group or sub-group, that are subject to the waiver and ensures a sufficient level of liquidity for all of these institutions;
(c) the institutions have entered into contracts that, to the satisfaction of the competent authorities, provide for the free movement of funds between them to enable them to meet their individual and joint obligations as they become due;
(d) there is no current or foreseen material practical or legal impediment to the fulfilment of the contracts referred to in (c).

According to the last subparagraph of Article 8(1) CRR, the Commission shall report to the European Parliament and the Council on any legal obstacles which are capable of rendering impossible the application of condition (c) and is invited to make a legislative proposal, if appropriate, by 31 December 2015, on which of those obstacles should be removed.

In the past few months, the European Commission has consulted directly with both industry and national public authorities to identify possible obstacles to the free movement of funds between institutions within a SLSG in the EU; to consider how these might be overcome; and whether there is a need for regulatory action at EU level. The Commission has also discussed this topic in the Commission Expert Group on Banking, Payments and Insurance in September 2013.

• Primary Source

EUR-Lex: COM(2014)327: Follow the progress of this report through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2014:327:FIN

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