Banking Fraud — The Euro‐Regulatory Response
| Published date | 01 February 1995 |
| Date | 01 February 1995 |
| DOI | https://doi.org/10.1108/eb025663 |
| Pages | 35-38 |
| Author | George Walker |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 3 No. 1 — Euro-Fraud
EURO-FRAUD
Banking Fraud — The Euro-Regulatory Response
George Walker
Although considerable action has been taken in an
attempt to identify and correct the regulatory gaps
in domestic and international banking supervision
exposed by the collapse of the Bank of Credit and
Commerce International (BCCI) in July
1991,1
the
response of the European Community in the form
of a proposed Prudential Supervision Directive —
the so-called 'Post-BCCI Directive' — is still
locked in the complex decision-taking procedures
of the Community which were further revised by
the Maastricht Treaty on European Union in
December
1991.2
The original proposal for the new Directive was
published by the Commission on 28th July,
1993,3
with a view to making amendments to the princi-
pal banking, insurance and securities Directives (to
which the UCITS Directive was subsequently
added) in order to reinforce prudential supervision
and, in particular, to strengthen the powers of
supervisors by making them better equipped to
prevent cases of fraud and other irregularities in
the financial services sector.4
Following the various inquiries conducted after
the collapse of BCCI,5 the European Banking
Advisory Committee (BAC)6 sent a confidential
paper to the Commission concerning the regula-
tion of financial conglomerates after a series of
meetings at the beginning of 1993. Sir Leon Brit-
tan had made an announcement earlier in
November 1992 at the ECOFIN Council meeting
making reference to the major conclusions of the
inquiries conducted and, although it was stressed
that the basic approach of the Community's Direc-
tives in the financial services area was considered
sound, there were nevertheless aspects in which
the arrangements for financial supervision could be
strengthened.
The proposed Directive accordingly makes pro-
vision for four principal sets of amendments to be
made to the main framework Directives in con-
nection with group structures, head offices and
registered offices, exchange of information and the
role of statutory auditors.7
GROUP STRUCTURES
Where a financial undertaking is to seek authorisa-
tion as part of a group, information on the group
structure and relationships between group mem-
bers is to be provided as part of the conditions for
initial authorisation to ensure that the group struc-
ture is sufficiently transparent to enable the
financial undertaking to be effectively supervised.
Any subsequent changes in the group structure
must also be notified.
Although apparently minor, this is an important
amendment since the basic Directives which pro-
vide for the authorisation of credit institutions,
investment firms and insurance undertakings, to
which almost unrestricted rights of establishment
and service provision are then conferred, only
assess the sufficiency of the institutions on an indi-
vidual basis without reference to any group
structure of which they may form part. The only
existing requirement in this regard is that 'qualify-
ing' shareholders of financial institutions must be
suitable persons.8
The provision of information in connection
with the structure of the group will also subse-
quently assist in carrying out effective consolidated
supervision of the activities of the group on a con-
tinuing basis.9
HEAD OFFICE AND REGISTERED
OFFICE
The banking and insurance Directives are also to
be amended to require that the head office of a
financial undertaking must be maintained in the
same Member State as that of the registered office.
The Investment Services Directive already has a
provision to this effect.10 The basic objective of
Page 35
To continue reading
Request your trial