Concept (vertrouwelijk) 1 Onderwerp: EC; Public consultation on the reorganisation and winding up of credit institutions I OVERVIEW OF ISSUES RELATED TO DIRECTIVE 2001/24/EC Problems identified in the Directive Question 10a: Do you think that investment firms and collective investment undertakings should be covered by this or a separate directive? Question 10b: Are electronic money institutions covered by the legislation implementing the Directive in your country? Do you think more clarity is needed for e-money institutions? Question 10c: Do you think that the wording of Article 5 may be unclear and that more clarity along the above lines is needed? How is this provision transposed into domestic law in your country? Question 10d: Do you think that more clarity is needed regarding professional secrecy? How is this provision transposed into your country s law? Question 10e: Do you think that more clarity is needed regarding the equivalence of the nature of claims? Question 10f: Do you think that there are problems in the implementation of these provisions? Is there a need to insert harmonised definitions for these transactions in the Directive? Question 10g: Do you think that more clarity is needed regarding the conflict of laws rule to be applied in this case (general rule, article 20c or article 21)? a. Yes, in our opinion investment firms and collective investment undertakings should be covered by Directive 2001/24. It is preferable to adjust the scope of this Directive to the scope of the Capital Requirements Directive (CRD) and the scope of the Solvency II. b. Yes, electronic money institutions are covered by the Dutch legislation (paragraph 3.5.5 of the new Financial supervision act (FSA)). In case it is unclear for other Member States, it should be clarified. De Nederlandsche Bank F027
2 c. Article 5 underlines the principle of the home country control. This provision has been transposed into sections 3:205 FSA. d. The regulation regarding professional secrecy seems clear although in practise it caused some problems. For example, provision 33 of the Directive has been transposed into section 212nn of the Bankruptcy Act. This section allows DNB to provide information received from an institution in the course of its supervisory activities to the public receiver of that institution without violating its professional secrecy, although it may cause problems that the public receiver is not bound by professional secrecy. DNB is bound to its professional secrecy in its relation with the bankruptcy judge. The provisions 4 and 5 of the Directive have been transposed into several Acts, such as FSA part 1.5.1. obligation of secrecy and exceptions (sections 1:89-1:93a, more in particular section 1:91) and into section 212nn of the Bankruptcy Act. e. The qualification and ranking of claims is the responsibility of the home Member State. g. No. Problems related to exchange of information and proceedings Question 10h: Do you think that such a list will helpfully improve the communication between authorities? Question 10i: Do you think that such a standardised form would be necessary to improve information provision? Question 10j: Do you think that a precise deadline for publication is needed to avoid legal uncertainty? Question 10k: Do you think that a centralized contact point is needed to ensure a greater degree of transparency? Question 10l: Do you think that there is benefit for improvement and concretisation of the provisions of the Directive regarding third countries branches? Is there a need to have only one proceeding for all third country branches of the same credit institutions? h. Yes, such a list would be helpful.
3 i. Yes, it will contribute to the ease of implementation and application. j. No, the concept of earliest opportunity is clear enough and easy to apply for all kind of situations. k. Yes, a centralized contact point would be helpful. l. No, the situations in third countries are too diverse so a case-by-case approach will be needed. Question 11a: Do you think that it would be useful to extend the scope of the `competent authorities to Deposit Guarantee Schemes? Question 11b: Does the legislation of your Member State provide such priority rights? Would it be useful to harmonise such rights throughout the EU? a. No, the DGS is carried out by the competent authorities, so for the Netherlands extension of the scope would make no difference. b. Under Dutch Law the claim of the national Deposit Guarantee Scheme does not take priority over claims of other creditors. It would be useful to harmonise such rights throughout the EU. Question 12: Are there any further gaps, ambiguities or conflicts in the Directive on the reorganisation and winding up of credit institutions? Not in particular. II OVERVIEW OF ISSUES RELATED TO THE TREATMENT OF FINANCIAL GROUPS IN CRISIS SITUATION/UNDER REORGANISATION Question 13: Is the scope of the Directive 2001/24/EC too narrow? Should extension of the scope to banking groups be considered in order to keep pace with market developments? Yes, the same answer applies as under question 10a.
4 Question 14: Is the ability to transfer assets from the parent to the subsidiary or vice-versa necessary in crisis situations? Should it be facilitated and if so how? Yes, the ability to transfer assets is necessary because such a transfer might be crucial for the financial situation of the subsidiary or parent. To prevent that such transfers would be subordinated to other claims, like a ring fencing fiscal authority, it would be valuable to ring fence the asset meant for the transfer itself from other claims, especially in case of crisis situations. A. Banking law and regulatory responsibilities of the competent authorities Question 15a: Do banking laws pose limits on transactions that might be considered disadvantageous or detrimental for a credit institution, with the result that they will either be considered null and void or capable of triggering supervisory action? Question 15b: Are competent authorities empowered or obliged to prevent or prohibit intragroup transactions: i: in going concern situations? ii: in crisis situations? iii: in crisis situations if transactions are deemed detrimental to the subsidiary/parent? Question 15c: Even if competent authorities of the home and the host Member States agree to the asset transfer in the context of crisis, can competent authorities according to national rules be held liable for any deterioration of the situation? Question 15d: Is it for judicial authorities or competent authorities to deem whether a transaction is detrimental to a credit institution? Are the detrimental transactions precisely defined by law (or case law)? Question 15e: Does national law require intra-group transfers to take place on an arms length basis (i.e. under market conditions)? Question 15f: Are there other legal impediments in national financial legislation/regulation or specific requirements preventing subsidiaries transferring assets to the parent (or vice versa)? a. No, there are no banking laws posing limits on bank s transactions with the result that they will be considered null and void. Civil law prohibits in general entering into transactions that they
5 know will be disadvantageous for their creditors (actio pauliana). Solvency requirements may limit the scope of the transactions a bank is allowed to make. b. As a general rule any supervisor s reaction cannot alter contractual relationship between the credit institution and third parties (section 1:75 par 3 FSA). However, the supervisor is empowered to reduce the position in case the credit institution violates solvency requirements (section 1:75 par 2 FSA). In case emergency regulations have been declared applicable in the interest of the combined creditors, the administrators shall, solely and exclusively, exercise all powers of the managing directors, supervisory board members of the credit institution. The emergency regulations also mean that the credit institution cannot be required to fulfil its obligations existing prior to declaring the emergency regulations applicable. The credit institution has no authority to transfer assets without permission of the administrator. For the administrator the interest of the credit institution and its creditors prevail. In case of bankruptcy the same rules apply. c. Yes, in case competent authorities reasonably could not have acted as they did considering all relevant circumstances. d. Yes, in a going concern situation it is to the supervisor to deem whether a transaction is detrimental. In case emergencies regulations has been declared applicable or in case of bankruptcy it is up to the administrator or trustee in bankruptcy. In case the creditors have objections, they can lodge an objection to the judicial authorities. Then it is to the Court to deem. e. No. f. Yes, tax laws discourage some intra group transactions. B. Company Law Question 16a: Do provisions of company law prohibit intra group transactions that might be disadvantageous or detrimental for a parent or subsidiary? To what extent is a banking group s interest a lawful objective (i.e. the group interest for a particular transaction may outweigh the interest of the parent or subsidiary)?
6 Question 16b: Could the conclusion of a contract or the adoption of a decision which may prove detrimental to the subsidiary be challenged and reversed? By whom? Under what circumstances? Question 16c: In which circumstances, where asset transfers take place with the parent undertaking or other related parties, may the management body of a subsidiary be held responsible? Question 16d: In the case of asset transfers in the interest of the group, is the parent undertaking required, under national law, to guarantee obligations of the subsidiaries vis-à-vis creditors? a. No. b. The Civil Act prohibits actio pauliana. In case of action pauliana the Court can reverse a transaction. c. Only if the management body of a subsidiary is involved in the transfer of assets, it can be held responsible. Specific arrangement between the parent and subsidiary may lead to another conclusion. d. No, unless specific arrangement put in place. Shareholders are not liable for acts of the corporation. C. Insolvency Law Question 17a: According to national law, is it presently possible to initiate a joint insolvency (reorganisation or winding-up) proceeding that includes all or a part of a financial group when: i. both the parent and subsidiary are insolvent? ii. the parent is solvent and the subsidiary is insolvent? iii. the parent is insolvent and the subsidiary is solvent? Question 17b: What are the conditions for these situations? Do they imply fully-fledged insolvency proceedings or merely procedural steps to ensure e.g. proper exchange of information?
7 Question 17c: Does your answer differ if the subsidiary is situated in a different jurisdiction to the parent? Question 17d: Who or which organization/authority may decide to treat financial group members jointly in insolvency or crisis management in your country? Question 17e: Is it presently possible in your Member State to appoint one insolvency representative, administrator to all members of a financial group involved into the proceedings? What are the conditions for this? Does this differ depending on whether the group is domestically located or cross-border? Question 17f: Can a single reorganization plan be implemented in your Member State for: i. the whole financial group if it is domestic? ii. the whole financial group if it has cross-border subsidiaries? Question 17g: Are intra group transactions taking place before the commencement of insolvency proceedings treated differently from transactions with unrelated parties in the Member States insolvency legislation, in particular with regard to provisions for the avoidance of transactions? Question 17h: What are the present rules for intra group financing after the commencement of reorganisation and winding-up proceedings? Under what circumstances can the assets of the solvent financial group member be used to finance the operation of the insolvent member? Question 17i: Is it presently possible in your Member State to extend liability to other members of the group that are not included in the insolvency proceedings? Question 17j: Is consolidation of pooling of assets of group members under reorganisation or winding-up proceedings possible in your Member State? Questions a to f do not apply under Dutch Law as Dutch Law does not contain rules concerning joint insolvency. Under Dutch Law the court makes an involuntary liquidation order against one legal person. g. Yes, as mentioned under question 15a, transactions entered into by the bankrupt entity can be declared null and void if the public receiver proves that the bankrupt entity knew it would be disadvantageous for its other creditors. In case of intra-group transactions entered into within one year before initiation of the bankruptcy proceedings, the bankrupt entity is deemed to have knowledge that the transaction would be disadvantageous for its other creditor. Thus, intra-group
8 transactions are treated differently from transactions with unrelated parties, in that the burden of proof is shifted to the bankrupt entity. h. As mentioned under question 15a and 15b in case of winding-up proceedings assets can not be transferred without permission of the administrator or trustee in bankruptcy. i. The same answer applies as under question 16c. j. No. D. Crisis management and reorganisation of banking groups Question 18: According to national law, to what extent are competent authorities involved in the reorganisation process (e.g. consultation from judicial authorities before deciding on the implementation of reorganisation measures). Under which circumstances (e.g. suspension of payments? Reorganisation process in general will have to be authorized by the supervisor. After the insolvency process has been initiated the public receiver has the sole authority regarding reorganisation. The same apply in case emergency regulations have been declared applicable. In that case the administrator has the sole authority. Question 19: In addition to the problems raised above, are there other issues relating to crisis management and reorganisation for financial groups in the EU which require particular attention? No.
9 DATA OF RESPONDENTS Question 20: Name of person completing the questionnaire L.H.M.M. van Goor, J.G. Rotte, and F. Lijffijt Country The Netherlands Name of organisation De Nederlandsche Bank NV Type of organisation Prudential supervisor Address Telephone Email address P.O. Box 98, 1000AB Amsterdam, The Netherlands 00 31 20 524 1969, 00 31 20 524 3278 or 00 31 20 524 5776 h.m.m.van.goor@dnb.nl, j.g.rotte@dnb.nl or f.lijffijt@dnb.nl Question 21: Do you agree to have your responses published on the Commission s website? Yes, we agree on it.