Lansky

According to section 7b of the Austrian Banking Act (new version), this regulation is intended to ensure that the regulatory requirements for credit institutions are met on a consolidated basis across the credit institution’s entire group. Although the EU Member States were obliged to transpose CRD V into national law by 28 December 2020, this has not yet been put into practice in Austria (as well as in numerous other Member States). However, it is expected that legislators will pass the amendment to the Banking Act over the next few weeks.  

Financial holding companies are investment holding companies whose subsidiaries are exclusively or predominantly credit institutions or investment firms. Mixed financial holding companies are investment holding companies that form a financial conglomerate together with their subsidiaries, at least one of which is a supervised entity, as defined by the FKG. After licensing has been carried out, the (mixed) financial holding companies are now to be responsible for compliance with the supervisory requirements on a consolidated basis according to the Banking Act, the CRR and the CRR II. However, licensing does not introduce any additional supervisory requirements for (mixed) financial holding companies on an individual level. 

The newly introduced licensing obligation that applies to (mixed) financial holding companies pursuant to section 7b of the Banking Act (new version) means that, unlike under the regulation of section 30 para 6 of the Banking Act that previously applied (under which the superordinate credit institution of the credit institution’s group, namely a credit institution with its registered office in Austria that is not itself subordinate to any other credit institution with its registered office in Austria belonging to the group, was always responsible for compliance with the provisions applicable to the group at the consolidated level), this responsibility can now also fall to a (mixed) financial holding company licensed in accordance with section 7b of the Banking Act (new version). Responsibility is transferred to a (mixed) financial holding company in this fashion if the requirements for exemption from the licensing obligation pursuant to section 7b para 6 of the Banking Act (new version) are not fully met by the (mixed) financial holding company, meaning that, in turn, it needs to obtain a licence pursuant to section 7b of the Banking Act (new). 

The FMA, as the consolidated authority, is simultaneously granted the necessary supervisory powers in article 7b of the Banking Act (new version) with respect to (mixed) financial holding companies domiciled in Austria, so that this can be enforced. Article 7b para 5 of the Banking Act (new version) sets out the individual requirements (in list form) that the (mixed) financial holding company must fulfil in order to obtain a licence. Establishing the legally prescribed mechanisms at the level of the (mixed) financial holding company, as well as within the credit institution group serves to ensure that the licensed (mixed) financial holding company can fulfil the supervisory requirements on a consolidated basis. 

The tasks and duties incumbent upon a (mixed) financial holding company licensed under section 7b of the Austrian Banking Act (new version) are scattered across the Austrian Banking Act, not to mention the CRR and CRR II. In this context, it is important to distinguish between (i) the tasks that can be distributed across the group, which can, therefore, also be performed by the subsidiaries of the licensed (mixed) financial holding company and (ii) the original tasks undertaken by the (mixed) financial holding company. 

Prior to licensing being executed, the (mixed) financial holding company must establish binding group-wide enforceable strategies relating to each individual area and topic provided for by law, such as risk management, internal control systems, reporting, resource allocation, group-wide ICAAP processes, etc. Furthermore, the (mixed) financial holding company must create an organisational structure within the group that ensures that conflicts of interest and skills are avoided. 

However, the individual subsidiaries are free to continue handling the operational implementation of the procedures specified by the (mixed) financial holding company (such as data management, reporting, actual execution of risk management, ICS, etc.). As part of this, the monitoring and control function undertaken by the (mixed) financial holding company means that it must be provided with sufficient rights and control mechanisms to be able to react in a timely manner to certain crisis situations, as well as other significant events within the group, and, in turn, be able to effectively control the individual members of the group on occasions such as these. 

If responsibility for compliance with supervisory requirements on a consolidated basis within a group of credit institutions is not to be transferred from a superordinate credit institution that was previously responsible pursuant to section 30 para 6 of the Banking Act to a (mixed) financial holding company, the (mixed) financial holding company now has the option of being exempted from the licensing requirement pursuant to section 7b para 6 of the Banking Act (new version). One of the most essential conditions for acquiring an exemption of this nature is that the (mixed) financial holding company does not participate in management, operational or financial decisions affecting the group or its subsidiaries, with these being CRR institutions or CRR financial institutions. In this case, the (mixed) financial holding company would have to ‘de-regulate’ itself vis-à-vis its subsidiaries. The application for the granting of the licence or the exemption from the licence obligation must be submitted by 28 June 2021. 

We are happy to offer our clients in-depth advice on how to put the newly introduced licensing requirement for (mixed) financial holding companies into practice and support them before and during the application process with the FMA.