1. GDV‘s Comments on the FCD EFCC Roundtable Session “Scope”
Dr. Axel Wehling
, Brussels

2. FCD review: Heading to an economic view?
level of alignment
full economic view (capital requirements and own funds)
2015
2012 ?
2009
economic view ?
Solvency II
Basel II (CRD)
accounting view
2005
FCD
2002
Basel I
Solvency I
1970
banking regulation
financial conglomerate regulation
insurance regulation

3. Current situation in identifying a financial conglomerate (Art
Current situation in identifying a financial conglomerate (Art. 3 FCD) is not in line with an economic view
Main criteria in identifying a financial conglomerate:
activities mainly in the financial sector (> 40 % of balance sheet total)
significant activities in different financial sectors:
(balance sheet of sector/total balance sheet + SCR of sector/total SCR)/2 > 10 % or
balance sheet total of smallest financial sector > 6 billion €
supervisors may decide not to regard a group as financial conglomerate if only b) is fulfilled taking into account the relative size (< 5 %) and the market share in MS (< 5 %)
The current identification of financial conglomerates is:
not in line with an economic view (but based on arbitrary accounting figures) and
not sufficiently risk based putting the FCD objectives in question.

4. GDV‘s position on the scope: define financial conglomerates by proportionality and allow opt-in
for groups running no material risks and without impact on the stability of the financial market, supplementary financial conglomerate supervision is not necessary
the GDV advocates to apply the proportionality principle taking into account the nature, scale and complexity on the basis of a consolidated economic view
using risk based measures (e. g. Solvency II capital requirements) would be more appropriate than purely accounting figures (if available, market consistent valuation is preferable instead of book values according to local GAAP)
the flexible application of the proportionality principle should not hinder to be subject of a financial conglomerate supervisory regime voluntarily (opt-in clause) if the group falls below a certain threshold (say, 10 billion €).

5. Review of the Scope of FCD - When is financial conglomerate supervision needed at top?
if the nature, scale and complexity of risks (= proportionality) of financial institutions is not captured adequately by
solo supervision
sectoral group supervision
therefore, financial conglomerate supervision should result from the application of the proportionality principle based on a consolidated view on the group
since financial conglomerates do manage risks in an integrated manner, supervision should reflect this way of management congruently

6. Back-up

7. Review of the Scope of FCD – Which entities/participations should fall in the scope of a financial conglomerate?
the overall risk position of a financial conglomerate is mostly a result of the risk exposure by its relevant entities
as regard capital adequacy calculations including other irrelevant entities does not change the picture and would only result in additional burden for groups
a too wide interpretation of the term “participation” in financial conglomerate supervision is not appropriate and would not reflect the proportionality principle
relevant entities?

8. Conclusions on the scope of financial conglomerate supervision
applying the proportionality principle restricts the scope of entities being supervised additionally within a financial conglomerate
a too wide interpretation of participations is not appropriate and results in distortions
the costs of financial conglomerate supervision have to be minimised without loss of reliability and relevance