Shearman & Sterling LLP | FinReg | European Banking Authority Consults on Bank Authorization Application Information Requirements
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  • European Banking Authority Consults on Bank Authorization Application Information Requirements

    11/08/2016

    The European Banking Authority published a consultation paper on proposed technical standards on the information to be provided by applicant banks to national regulators in support of their applications for authorization. The Capital Requirements Directive requires a bank to obtain authorization before it begins its operations. Member states set out the requirements for the authorization in their country which means that different standards apply across the EU. At the moment, national regulators stipulate the information required to be submitted in support of a bank's application for authorization and the requirements around the application process. CRD IV requires the EBA to prepare Regulatory Technical Standards setting out the information to be provided in support of an application for bank authorization, requirements applicable to shareholders and qualifying holdings and obstacles which may prevent the effective exercise of supervisory powers by a national regulator. The EBA is also required to prepare Implementing Technical Standards setting out the forms, templates and procedures relating to an authorization application. Once the RTS and ITS enter into force, the requirements will be directly applicable across the EU, largely replacing the existing national regimes on information requirements for authorization applications. However, the proposed RTS do allow some flexibility for national regulators to require additional information from an applicant and provide that information is not required where a national regulator has waived a certain authorization requirement for a particular applicant bank. The EBA is proposing that an application for authorization includes, amongst other things, information on a bank's identification and history, own funds, the proposed activities the bank intends to carry out, shareholders and close links, organizational structure and internal audit policies and infrastructure.

    The EBA is also seeking views on whether the RTS should provide for information to be submitted in a sequenced manner to allow for a limited authorization regime for start-ups during an interim period. The EBA has not included provisions on this in the proposed draft RTS because CRD does not provide for such an application process and restricted interim authorizations might cause confusion and raise concerns about the credibility of banks. An example proposed by the EBA would allow a new bank to obtain restricted authorization (such as a cap on the amount of deposits it could accept) for a limited period by initially fulfilling fewer requirements and subsequently satisfying the remaining requirements over a set period of time. Once a bank had then met all of the requirements, the restrictions would be lifted.
    The proposed draft ITS set out the form that applicant banks would use to obtain authorization, the procedures and requirements for submission of the application and the approach that a national regulator should take for incomplete applications. There are no provisions on how long a national regulator would have to assess a complete application and it is expected that national regulators or members states will continue to set this timeframe.

    The EBA is proposing that the technical standards would only apply six months after they enter into force and only to applications submitted after that date. The consultation closes on February 8, 2017.

    View the consultation paper.