26.10.2017   

EN

Official Journal of the European Union

L 276/1

(1)

On 10 July 2014, the Council adopted Regulation (EU) No 747/2014.

(2)

On 17 October 2017, the United Nations Security Council Committee established pursuant to United Nations Security Council Resolution 1591 (2005) updated the information relating to one person subject to restrictive measures.

(3)

Annex I to Regulation (EU) No 747/2014 should therefore be amended accordingly,

26.10.2017   

EN

Official Journal of the European Union

L 276/4

(1)

In order to enable competent authorities to carry out a thorough assessment as part of the process for granting and refusing requests for authorisation of investment firms, an applicant should be required to submit to the competent authority precise information at the time of the initial request for authorisation. The competent authority should retain the right to request additional information from the applicant during the assessment process in accordance with the criteria and timelines set out in Directive 2014/65/EU.

(2)

In order to ensure that the competent authority's assessment is based on accurate information, it is essential that an applicant provide copies of its corporate documents, including a certified copy of the instrument of incorporation, by-laws and the articles of association and a copy of registration of the company in the national register of companies.

(3)

Information on the sources of capital available, including the means used for transferring financial resources when raising capital, should be submitted by an applicant in order to enable competent authorities to assess that all relevant requirements in the field of financial crime have been complied with.

(4)

Newly established entities, when submitting an application, may only be in a position to provide information on how capital will be raised and the types and amount of capital that will be raised. However, evidence of paid-up share capital and other types of capital raised, together with information on the sources of capital, should be provided to the competent authorities, in view of obtaining authorisation, before authorisation is granted. Such evidence may include copies of relevant capital instruments and corresponding bank statements.

(5)

In order to enable competent authorities to assess the reputation of any person who will direct the business of the investment firm, of the proposed shareholders and members with qualifying holdings it is important to require an applicant to provide information on these persons.

(6)

In order to assess the experience of any person who will direct the business of the investment firm, competent authorities should be presented by an applicant with information on the relevant education and professional training, and professional experience of the members of the management body and persons effectively directing the business and their related powers and any proxies.

(7)

Financial information concerning the investment firm should be submitted by an applicant to the competent authorities so that these may assess the financial soundness of that investment firm.

(8)

Since, at time of the application, newly established firms might not be in the position to provide information on the auditors; those applicants should be exempted from providing this information to the competent authority unless the auditors have already been appointed.

(9)

Information relevant to the assessment of the organisational structure of the investment firm should include details on the internal control system, on the measures to detect conflicts of interests, and on client assets safeguarding arrangements, in order to allow the competent authority to assess whether that investment firm will be able to comply with its obligations under Article 16 of Directive 2014/65/EU.

(10)

National competent authorities may authorise as investment firm a natural person or a legal person managed by a single natural person. It is therefore appropriate to set out authorisation requirements applicable to the management of investment firms that are natural persons or legal persons managed by a single natural person.

(11)

In order to provide legal certainty, clarity and predictability with regards to the authorisation process, it is appropriate that the criteria against which competent authorities appraise the suitability of the shareholders or members with qualifying holdings, when authorising an investment firm, are the same criteria set out by Article 13 of Directive 2014/65/EU for the assessment of a proposed acquisition. In particular, competent authorities should appraise the suitability of the shareholders or members with qualifying holdings and the financial soundness of the firm taking into account criteria relating to the reputation, experience of the persons directing the business of the investment firm and the financial soundness of the firm.

(12)

In order to identify obstacles that could prevent effective exercise of the supervisory functions, competent authorities should consider the complexity and transparency of group structure of investment firm, the geographical location of the entities of the group and the activities the group entities perform.

(13)

Directive 95/46/EC of the European Parliament and of the Council (2) applies to the processing of personal data by the Member States in the application of this Regulation.

(14)

For reasons of consistency and in order to ensure the smooth functioning of the financial markets, it is necessary that the provisions laid down in this Regulation and the related national provisions transposing Directive 2014/65/EU apply from the same date.

(15)

This Regulation is based on the draft regulatory technical standards submitted by European Securities and Markets Authority (ESMA) to the Commission.

(16)

In accordance with Article 10 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council (3), ESMA has conducted open public consultations, analysed the potential related costs and benefits and requested the opinion of the Securities and Markets Stakeholder Group established in accordance with Article 37 of that Regulation,

(a)

its name (including its legal name and any other trading name to be used); legal structure (including information on whether it will be a legal person or, where allowed by national legislation, a natural person), address of the head office and, for existing companies, registered office; contact details; its national identification number, where available; as well as:

(b)

the list of investment services and activities, ancillary services and financial instruments to be provided, and whether clients' financial instruments and funds will be held (even on a temporary basis).

(c)

copies of corporate documents and evidence of registration with the national register of companies, where applicable.

(a)

details on the use of private financial resources including the origin and availability of those funds;

(b)

details on access to capital sources and financial markets including details of financial instruments issued or to be issued;

(c)

any relevant agreements and contracts regarding the capital raised;

(d)

information on the use or expected use of borrowed funds including the name of relevant lenders and details of the facilities granted or expected to be granted, including maturities, terms, pledges and guarantees, along with information on the origin of the borrowed funds (or funds expected to be borrowed) where the lender is not a supervised financial institution;

(e)

details on the means of transferring financial resources to the firm including the network used to transfer such funds.

For the purposes of point (b), information on types of capital raised shall refer, where relevant, to the types of capital specified under Regulation (EU) No 575/2013, specifically whether the capital comprises Common Equity Tier 1 items, Additional Tier 1 items or Tier 2 items.

(a)

the list of persons with a direct or indirect qualifying holding in the investment firm, and the amount of these holdings and, for indirect holdings, the name of the person through which the stake is held and the name of the final holder;

(b)

for persons with a qualifying holding (direct or indirect) in the investment firm the documentation required from proposed acquirers for the acquisition and increases in qualifying holdings in investment firms in accordance with Articles 3, 4 and 5 of Commission Delegated Regulation 2017/1946 of 11 July 2017 supplementing Directives 2004/39/EC and 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for an exhaustive list of information to be included by proposed acquirers in the notification of a proposed acquisition of a qualifying holding in an investment firm (4);

(c)

for corporate shareholders that are members of a group, an organisational chart of the group indicating the main activities of each firm within the group, identification of any regulated entities within the group and the names of the relevant supervisory authorities as well as the relationship between the financial entities of the group and other non-financial group entities.

(d)

For the purposes of point (b), where the holder of a qualifying holding is not a natural person, the documentation shall also relate to all members of the management body and the general manager, or any other person performing equivalent duties.

(a)

in respect of members of the management body and persons effectively directing the business and their related powers and any proxies:

For the purposes of point (ix) of point (a), financial interests include interests such as credit operations, guarantees and pledge, whereas non-financial interests may include interests such as family or close relationships.

(b)

The staff of the internal management and control bodies.

(a)

forecast information at an individual and, where applicable, at consolidated group and sub-consolidated levels, including:

(b)

for companies that are already active, statutory financial statements, at an individual and, where applicable, at consolidated group and sub-consolidated levels for the last three financial periods, approved, where the financial statements are audited, by the external auditor, including:

(c)

an analysis of the scope of consolidated supervision under Regulation (EU) No 575/2013, including details on which group entities will be included in the scope of consolidated supervision requirements post-authorisation and at which level within the group these requirements will apply on a full or sub-consolidated basis.

(a)

a programme of initial operations for the following three years, including information on planned regulated and unregulated activities detailed information on the geographical distribution and activities to be carried out by the investment firm. Relevant information in the programme of operations shall include:

(b)

details of the firm's auditors, when available at time of application for authorisation;

(c)

the organisational structure and internal control systems of the company, comprising:

(d)

information on the status of the application undertaken by the investment firm to become a member of the investor compensation scheme of the Home Member State or evidence of membership to the investor compensation scheme, where available;

(e)

a list of the outsourced functions, services or activities (or those intended to be outsourced) and a list of the contracts concluded or foreseen with external providers and resources (in particular, human and technical, and the internal control system) allocated to the control of the outsourced functions, services or activities;

(f)

measures to identify and to prevent or manage conflicts of interest that arise in the course of providing investment and ancillary services and a description of product governance arrangements;

(g)

a description of systems for monitoring the activities of the firm, including back–up systems, where available, and systems and risk controls where the firm wishes to engage in algorithmic trading and/or provide direct electronic access;

(h)

information on the compliance, internal control, and, risk management systems (a monitoring system, internal audits and the advice and assistance functions).

(i)

details on the systems for assessing and managing the risks of money laundering and terrorist financing;

(j)

business continuity plans, including systems and human resources (key personnel);

(k)

record management, record-keeping and record retention policies;

(l)

a description of the firm's manual of procedures.

(a)

the natural person is easily contactable at short notice by the competent authorities;

(b)

the natural person has sufficient time dedicated to this function;

(c)

the governing bodies or bylaws of the investment firm empower a person to substitute the manager immediately and perform all his duties if the latter is unable to perform them;

(d)

the person empowered pursuant to the previous point shall be of sufficiently good repute and have sufficient experience to substitute the manager for the time of absence, or until a new manager is appointed, so as to ensure sound and prudent management of the investment firm. The person empowered for investment firms that are natural persons, shall be also available to assist insolvency practitioners and relevant authorities in the liquidation of the firm. This person shall have the necessary availability for this function.

(a)

the reputation and experience of any person who will direct the business of the investment firm;

(b)

the reputation of the proposed shareholders and members with qualifying holdings;

(c)

the financial soundness of the proposed shareholders and members with qualifying holding, in particular in relation to the type of business pursued and envisaged in the investment firm;

(d)

whether the investment firm will be able to comply and continue to comply with the prudential requirements set out in Article 15 of Directive 2014/65/EU and, where applicable, Directives 2002/87/EC (6) and 2013/36/EU (7) of the European Parliament and of the Council and in particular, whether the group of which it will become a part has a structure that makes it possible to exercise effective supervision, effectively exchange information among the competent authorities and determine the allocation of responsibilities among the competent authorities;

(e)

whether there are reasonable grounds to suspect that, in connection with the authorisation of the investment firm, money laundering or terrorist financing within the meaning of Article 1 of Directive 2005/60/EC of the European Parliament and of the Council (8) is being or has been committed or attempted, or that the authorisation of the investment firm could increase the risk thereof.

(a)

it is complex and not sufficiently transparent;

(b)

it has a geographical location of group entities;

(c)

it includes activities performed by the group entities that may prevent the competent authority to effectively appraise the suitability of the shareholders or members with qualifying holdings or the influence of close links with the investment firm.

26.10.2017   

EN

Official Journal of the European Union

L 276/12

(1)

It is appropriate to set out common standard forms, templates and procedures to ensure the accurate assessment by Member States' competent authorities of notifications of proposed acquisitions or increases of qualifying holdings in an investment firm. In those cases, the relevant competent authorities should consult and provide each other with any essential or relevant information.

(2)

To facilitate the cooperation between them and ensure efficiency in their exchange of information, competent authorities designated in accordance with Article 48 of Directive 2004/39/EC should designate contact persons specifically for the purpose of the consultation process provided for in Article 10(4) of Directive 2004/39/EC and a centralised list of those contact persons should be maintained by the European Securities and Markets Authority (ESMA).

(3)

Consultation procedures containing clear timing constraints should be set up in order to ensure the timely and efficient cooperation between competent authorities. A clear cooperation procedure should include a preliminary notice to be sent by the requesting authority to the requested authority, to inform the requested authority of the ongoing assessment.

(4)

The procedures should also aim at ensuring that competent authorities cooperate and work towards the improvement of the process by promoting the exchange of feedback on the quality and relevance of the information received.

(5)

Any exchange or transmission of information between competent authorities, other authorities, bodies or persons should be in accordance with the rules on personal data as laid down in Directive 95/46/EC of the European Parliament and of the Council (3).

(6)

Regulation (EC) No 45/2001 of the European Parliament and of the Council (4) applies to the processing of personal data by ESMA in the application of this Regulation.

(7)

This Regulation is based on the draft implementing technical standards submitted by ESMA to the Commission.

(8)

ESMA did not publicly consult or analyse the potential related costs and benefits of introducing the standard forms, templates and procedures for the consultation process between relevant competent authorities, as this was considered disproportionate in relation to their scope and impact.

(9)

Directive 2014/65/EU entered into force on 2 July 2014. Article 12(9) of Directive 2014/65/EU replaces Article 10a(8) of Directive 2004/39/EC and contains empowerments to ESMA for the development of implementing technical standards which are identical to those provided for under Article 10a(8) of Directive 2004/39/EC. Furthermore, the content of Articles 10b(4) and Article 10(4) of Directive 2004/39/EC is also identical to the content of Article 13(4) and Article 11(2) of Directive 2014/65/EU. In accordance with Article 94(1) of Directive 2014/65/EU, Directive 2004/39/EC will be repealed with effect from 3 January 2017. The adoption of the technical standards by the Commission in accordance with Article 10a(8) of Directive 2004/39/EC should also be considered in compliance with Article 12(8) of Directive 2014/65/EU with the consequence that the technical standard will continue to apply after 3 January 2018 without the need for further amendment,

(a)

the relevant information requested in the consultation notice, including any views or reservations in relation to the acquisition by the proposed acquirer;

(b)

any other essential information that may influence the assessment, on its own initiative.

26.10.2017   

EN

Official Journal of the European Union

L 276/22

(1)

It is appropriate to set out common standard forms, templates and procedures to ensure a uniform mechanism by which Member States' competent authorities effectively exercise their powers in respect of the authorisation of firms for the provision of investment services, investment activities and, where relevant, of ancillary services.

(2)

To facilitate communication between an applicant seeking authorisation as an investment firm in accordance with Title II of Directive 2014/65/EU and the competent authority, competent authorities should designate a contact point specifically for the purpose of the application process and should publish the information on the contact point on their website.

(3)

In order to allow competent authorities to assess whether changes to the management body of the firm may pose a threat to the effective, sound and prudent management of the firm, and to adequately take into consideration the interests of its clients and the integrity of the market, clear time limits should be defined for the submission of information on those changes.

(4)

Firms should however be exempted from the requirement to submit information on changes to the management body before that change takes effect where the change is due to factors not within the control of the firm, such as in the case of the death of a management body member. Under those circumstances, firms should be allowed to notify the competent authority within 10 working days after the change.

(5)

Directive 95/46/EC of the European Parliament and of the Council (2) applies to the processing of personal data by the Member States in the application of this Regulation.

(6)

This Regulation is based on the draft implementing technical standards submitted by the European Securities and Markets Authority (ESMA) to the Commission.

(7)

ESMA has conducted open public consultations, analysed the potential related costs and benefits and requested the opinion of the Securities and Markets Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council (3),

26.10.2017   

EN

Official Journal of the European Union

L 276/32

(1)

An exhaustive list of information should be required from a proposed acquirer of a qualifying holding in an investment firm at the time of the initial notification to enable competent authorities to carry out the assessment of the proposed acquisition. Information on the identity of the proposed acquirer and of the persons who will direct the business should be provided by the proposed acquirer irrespective of whether it is a natural or a legal person, in order to enable the competent authority of the target entity to assess the reputation of that proposed acquirer.

(2)

Information on the identity of the beneficial owners and on the reputation and experience of the persons who effectively direct the business of the proposed acquirer is also necessary where the proposed acquirer is a legal person. Similarly, where the proposed acquirer is or is intended to be a trust structure, it is necessary for the competent authority of the target entity to obtain information on both the identity of the trustees who will manage the assets of the trust, and the identity of the beneficial owners of those assets to be able to assess the reputation and experience of these persons.

(3)

Where the proposed acquirer is a natural person, it is necessary to obtain information both in relation to the proposed acquirer and in relation to any undertaking formally directed or controlled by the proposed acquirer in order to provide the competent authority of the target entity with full information relevant to the assessment of reputation. Where the proposed acquirer is a legal person it is necessary to obtain this information in relation to any person who effectively directs the business of the proposed acquirer, any undertaking under the proposed acquirer's control, and any shareholder exerting significant influence on the proposed acquirer in order to provide the competent authority with full information relevant to the assessment of reputation.

(4)

The information relevant to the assessment of reputation should include details of criminal proceedings, historical or ongoing, as well as civil or administrative cases. Similarly, information should be provided in relation to all open investigations and proceedings, sanctions or other enforcement decisions against the proposed acquirer, as well as other information such as refusal of registration or dismissal from employment or a position of trust which is deemed relevant in order to assess the reputation of the proposed acquirer.

(5)

Information on whether an assessment of reputation as an acquirer, or as a person who directs the business of a credit institution, assurance, insurance or re-insurance undertaking, investment firm or any other entity hasalready been conducted by another competent authority or other authority and, if so, the outcome of such assessment, should be provided by the proposed acquirer in order to ensure that the outcome of investigations run by other authorities are duly considered by the competent authority of the target entity when assessing the proposed acquirer.

(6)

Financial information concerning the proposed acquirer should be provided in order to assess the financial soundness of that proposed acquirer.

(7)

Information on the financial and non-financial interests or relationships of the proposed acquirer with any shareholders or directors or members of senior management of the target entity or person entitled to exercise voting rights in the target entity, or with the target entity itself or its group, should be provided in order to allow the competent authority of the target entity to assess whether the existence of any potential conflict of interests will not affect the financial soundness of the proposed acquirer.

(8)

Certain additional information, including information on the shareholding owned or contemplated to be owned before and after the proposed acquisition, is necessary when the proposed acquirer is a legal person in order to allow the competent authority of the target entity to complete the assessment of the proposed acquisition as in such cases the legal and group structures involved may be complex and may necessitate detailed review in relation to reputation, close links, a potential action in concert with other parties, and the ability of the competent authority of the target entity to continue effective supervision of the target entity.

(9)

Where the proposed acquirer is an entity established in a third country or is part of a group established outside the Union, additional information should be provided so that the competent authority of the target entity can assess whether there are obstacles to the effective supervision of the target entity posed by the legal regime of the third country, and can also ascertain the proposed acquirer's reputation in that third country.

(10)

Where the proposed acquirer is a sovereign wealth fund, information should be provided by the proposed acquirer to ascertain the controllers of the fund and its investment policy. This is relevant for the competent authority of the target entity both for the assessment of reputation and for assessing whether there is any impact on the effective supervision of the target entity.

(11)

Specific information enabling an assessment as to whether the proposed acquisition will impact on the ability of the competent authority of the target entity to carry out effective supervision of the target entity should be required. This should include an assessment of whether the close links of the proposed acquirer will impact on the ability of the target entity to continue to provide timely and accurate information to its supervisor. For legal persons, it is also necessary to assess the impact of the proposed acquisition on the consolidated supervision of the target entity and the group it would belong to after the acquisition.

(12)

Information on the financing of the proposed acquisition, including information concerning all means and sources of financing, should be provided by the proposed acquirer who should be able to present evidence about the original source of all funds and assets in order for the competent authority of the target entity to assess whether there is a risk of money laundering activities.

(13)

Proposed acquirers holding a qualifying holding of between 20 % and up to 50 % in the target entity should provide information on strategy to the competent authority of the target entity in order to ensure a comprehensive assessment of the proposed acquisition. Similarly, proposed acquirers holding a qualifying holding of less than 20 % in the target entity but exercising an equivalent influence over it through other means such as the relationships between the proposed acquirer and the existing shareholders, the existence of shareholders' agreements, the distribution of shares, participating interests and voting rights across shareholders or the proposed acquirer's position within the group structure of the target entity should also provide that information to ensure a high degree of homogeneity in assessing proposed acquisitions.

(14)

Where there is a proposed change in control of the target entity, the proposed acquirer should, as a general rule, submit a full business plan. However, where there is no proposed change in the control of the target entity, it is sufficient to be in possession of certain information on the entity's future strategy and the proposed acquirer's intentions for the target entity in order to assess whether this will not affect the financial soundness of the proposed acquirer.

(15)

It is proportionate that, in certain cases, the proposed acquirer should only produce limited information. In particular, where the proposed acquirer has been assessed by the competent authority of the target entity within the previous two years, or where the target entity is a small investment firm and the proposed acquirer is an entity authorised and supervised within the Union, it should only be necessary to provide certain reduced information to the competent authority of the target entity.

(16)

Any exchange or transmission of information between competent authorities, other authorities, bodies or persons should be carried out in accordance with the rules on personal data as laid down in Directive 95/46/EC of the European Parliament and of the Council (3).

(17)

Regulation (EC) No 45/2001 of the European Parliament and of the Council (4) applies to the processing of personal data by the European Securities and Markets Authority (ESMA) in the application of this Regulation.

(18)

This Regulation is based on the draft regulatory technical standards submitted by ESMA to the European Commission.

(19)

ESMA has conducted an open public consultation on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the opinion of the Securities and Markets Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council (5).

(20)

Directive 2014/65/EU entered into force on 2 July 2014. Article 12(8) of that Directive replaces Article 10a(8) of Directive 2004/39/EC and contains empowerments to ESMA for the development of regulatory technical standards which are identical to those provided for under Article 10a(8) of Directive 2004/39/EC. Furthermore, the content of Articles 10b(4) and Article 10(4) of Directive 2004/39/EC is also identical to the content of Article 13(4) and Article 11(2) of Directive 2014/65/EU. In accordance with Article 94(1) of Directive 2014/65/EU, Directive 2004/39/EC will be repealed with effect from 3 January 2018. The adoption of the technical standards by the Commission in accordance with Article 10a(8) of Directive 2004/39/EC should also be considered in compliance with Article 12(8) of Directive 2014/65/EU with the consequence that the technical standard will continue to apply after 3 January 2018 without the need for further amendment,

(a)

personal details including the person's name, date and place of birth, address, and contact details and, where available, the personal national identification number;

(b)

a detailed curriculum vitae or equivalent document, stating relevant education and training, previous professional experience, and any professional activities or other relevant functions currently performed.

(a)

documents certifying the business name and registered address of its head office, and postal address if different, contact details and, where available, its national identification number;

(b)

registration of legal form in accordance with relevant national legislation;

(c)

an up-to-date overview of the entrepreneurial business of the legal person;

(d)

a complete list of persons who effectively direct the business, their name, date and place of birth, address, contact details, their national identification number where available, their detailed curriculum vitae stating relevant education and training, their previous professional experience, and their professional activities or other relevant functions currently performed;

(e)

the identity of all persons who may be considered to be beneficial owners of the legal person, their name, date and place of birth, address, contact details, and, where available, their national identification number.

(a)

the identity of all trustees who manage assets under the terms of the trust document;

(b)

the identity of all persons who are beneficial owners of the trust assets and their respective shares in the distribution of income;

(c)

the identity of all persons who are settlors of the trust.

(a)

in respect of the proposed acquirer and of any undertaking directed or controlled by the proposed acquirer, over the past 10 years:

(b)

information as to whether an assessment of reputation of the acquirer has already been conducted by another supervisory authority, the identity of that authority, and evidence of the outcome of the assessment;

(c)

information regarding the current financial position of the proposed acquirer, including details concerning sources of revenues, assets and liabilities, pledges and guarantees, granted or received;

(d)

a description of the business activities of the proposed acquirer;

(e)

financial information including credit ratings and publicly available reports on the undertakings controlled or directed by the proposed acquirer and, if applicable, on the proposed acquirer;

(f)

a description of the financial and non-financial interests or relationships of the proposed acquirer with:

(g)

information on any other interests or activities of the proposed acquirer that may be in conflict with those of the target entity and possible solutions for managing those conflicts of interest.

(a)

information regarding the proposed acquirer, any person who effectively directs the business of the proposed acquirer, any undertaking under the proposed acquirer's control, and any shareholder exerting significant influence on the proposed acquirer as identified in point (e). That information shall include the following:

(b)

information as to whether an assessment of reputation of the acquirer or of the person who directs the business of the acquirer has already been conducted by another supervisory authority, the identity of that authority and evidence of the outcome of the assessment;

(c)

a description of financial interests, and non-financial interests or relationships of the proposed acquirer, or, where applicable, the group to which the proposed acquirer belongs, as well as the persons who effectively direct its business with:

(d)

information on any other interests or activities of the proposed acquirer that may be in conflict with those of the target entity and possible solutions for managing those conflicts of interest;

(e)

the shareholding structure of the proposed acquirer, with the identity of all shareholders exerting significant influence and their respective share of capital and voting rights including information on any shareholders agreements;

(f)

if the proposed acquirer is part of a group, as a subsidiary or as the parent undertaking, a detailed organisational chart of the entire corporate structure and information on the share of capital and voting rights of shareholders with significant influence of the entities of the group and on the activities currently performed by the entities of the group;

(g)

if the proposed acquirer is part of a group as a subsidiary or as the parent company, information on the relationships between the financial and the non-financial entities of the group;

(h)

identification of any credit institution; assurance, insurance or re-insurance undertaking; collective investment undertakings and their managers or investment firm within the group, and the names of the relevant supervisory authorities;

(i)

statutory financial statements, at an individual and, where available, at consolidated and sub-consolidated group levels,, for the last three financial periods. Where those financial statements are audited externally, the proposed acquirer shall provide them approved by the external auditor. The statutory financial statements shall include:

(j)

where available, information about the credit rating of the proposed acquirer and the overall rating of its group.

(a)

a certificate of good-standing or equivalent document from the relevant foreign competent authorities in relation to the proposed acquirer;

(b)

a declaration by the relevant foreign competent authorities that there are no obstacles or limitations to the provision of information necessary for the supervision of the target entity;

(c)

general information on the regulatory regime of that third country as applicable to the proposed acquirer.

(a)

the name of the ministry or government department in charge of defining the investment policy of the fund;

(b)

details of the investment policy and any restrictions on investment;

(c)

the name and position of the individuals responsible for taking the investment decisions for the fund, as well as the details of qualifying holdings or the influence as referred to in Article 11(2) exerted by the identified ministry or government department on the day-to-day operations of the fund and the target entity.

(a)

personal details including the person's name, date and place of birth, address and contact details and, where available, the personal national identification number;

(b)

the position for which the person is or will be appointed;

(c)

a detailed curriculum vitae stating relevant education and professional training, professional experience, including the names of all organisations for which the person has worked and nature and duration of the functions performed, in particular for any activities within the scope of the position sought, and documentation relating to person's experience such as a list of reference persons including contact information and letters of recommendation. For positions held in the past 10 years, when describing these activities, the person shall specify their delegated powers, internal decision-making powers and the areas of operations under their control. If the curriculum vitae includes other relevant experiences, including management body representation, this shall be stated;

(d)

information on the following:

(e)

information as to whether an assessment of reputation as a person who directs the business has already been conducted by another supervisory authority, the identity of that authority and evidence of the outcome of this assessment;

(f)

a description of financial interests, and non-financial interests or relationships of the person and that person's close relatives to members of the management body and key function holders in the same institution, the parent institution and subsidiaries and shareholders;

(g)

the minimum time, in annual and monthly indications, that will be devoted to the performance of the person's functions within the target entity;

(h)

the list of executive and non-executive directorships currently held by the person.

(a)

identification of the target entity;

(b)

details of the proposed acquirer's intentions with respect to the proposed acquisition, including the strategic investment or portfolio investment;

(c)

information on the shares of the target entity owned, or contemplated to be owned, by the proposed acquirer before and after the proposed acquisition, including:

(d)

a description of any action in concert with other parties, including the contribution of those other parties to the financing of the proposed acquisition, the means of participation in the financial arrangements in relation to the proposed acquisition and future organisational arrangements of the proposed acquisition;

(e)

the content of intended shareholder's agreements with other shareholders in relation to the target entity;

(f)

the proposed acquisition price and the criteria used when determining such price and, where there is a difference between the market value and the proposed acquisition price, an explanation as to why that is the case.

(a)

details on the use of private financial resources and the origin and availability of the funds, including any relevant documentary support to provide evidence to the competent authority that no money laundering is attempted through the proposed acquisition;

(b)

details on the means of payment of the proposed acquisition and the network used to transfer funds;

(c)

details on access to capital sources and financial markets including details of financial instruments to be issued;

(d)

information on the use of borrowed funds including the name of relevant lenders and details of the facilities granted, including maturities, terms, pledges and guarantees, as well as information on the source of revenue to be used to repay such borrowings and the origin of the borrowed funds where the lender is not a supervised financial institution;

(e)

information on any financial arrangement with other shareholders of the target entity;

(f)

information on assets of the proposed acquirer or the target entity which are to be sold in order to help finance the proposed acquisition, as well as the conditions of the sale, including price, appraisal, details regarding the characteristics of the assets and information on when and how the assets have been acquired.

(a)

the period for which the proposed acquirer intends to hold its shareholding after the proposed acquisition and any intention of the proposed acquirer to increase, reduce or maintain the level of their shareholding in the foreseeable future;

(b)

an indication of the intentions of the proposed acquirer in relation to the target entity, including whether or not it intends to exercise any form of control over the target entity, and the rationale for that action;

(c)

information on the financial position of the proposed acquirer and its willingness to support the target entity with additional own funds if needed for the development of its activities or in case of financial difficulties.

(a)

all the information set out in Article 10;

(b)

details on the influence that the proposed acquirer intends to exercise on the financial position in relation to target entity including dividend policy, the strategic development, and the allocation of resources of the target entity;

(c)

a description of the proposed acquirer's intentions and expectations in relation to the target entity in the medium term, covering all the elements referred to in Article 12(2) and (3).

(a)

the overall aim of the proposed acquisition;

(b)

medium-term financial goals which may be stated in terms of return on equity, cost-benefit ratio, earnings per share, or in other terms as appropriate;

(c)

the possible redirection of activities, products, targeted customers and the possible reallocation of funds or resources expected to impact on the target entity;

(d)

general processes for including and integrating the target entity in the group structure of the proposed acquirer, including a description of the main interactions to be pursued with other companies in the group, as well as a description of the policies governing intra-group relations.

(a)

a forecast balance sheet and income statement;

(b)

a forecast prudential capital requirements and solvency ratio;

(c)

information on the level of risk exposures including credit, market and operational risks as well as other relevant risks;

(d)

a forecast of intra-group transactions.

(a)

the composition and duties of the administrative, management or supervisory body, and the main committees created by such decision-taking body including the management committee, risk committee, audit committee, remuneration committee, and including information concerning the persons who will be appointed to direct the business;

(b)

administrative and accounting procedures and internal controls, including changes in procedures and systems relating to accounting, internal audit, compliance with anti-money laundering and risk management, and the appointment of key functions of internal auditor, compliance officer and risk manager;

(c)

the overall IT systems and organisation including any changes concerning the IT outsourcing policy, the data flowchart, the in-house and external software used and the essential data and systems security procedures and tools such as back-up, continuity plans and audit trails;

(d)

the policies governing outsourcing, including information on the areas concerned, the selection of service providers, and the respective rights and obligations of the parties to the outsourcing contract such as audit arrangements and the quality of service expected from the provider;

(e)

any other relevant information pertaining to the impact of the acquisition on the corporate governance and general organisational structure of the target entity, including any modification regarding the voting rights of the shareholders.

(a)

where the proposed acquirer is a natural person:

(b)

where the proposed acquirer is a legal person:

(c)

where the proposed acquirer is a trust:

(a)

it does not hold assets of its clients;

(b)

it is not authorised for the investment services and activities ‘Dealing on own account’ or ‘Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis’ referred to in points (3) and (6) of Section A of Annex I of Directive 2004/39/EC;

(c)

where it is authorised for the investment service of ‘Portfolio management’ as referred to in point (4) of Section A of Annex I of Directive 2004/39/EC, the assets under management by the firm are below EUR 500 million.

26.10.2017   

EN

Official Journal of the European Union

L 276/44

(1)

Article 12 of the Agreement between the European Union and Armenia on the facilitation of the issuance of visas (1) (‘the Agreement’) sets up a Joint Committee (the ‘Joint Committee’). It provides that the Joint Committee is, in particular, to monitor the implementation of the Agreement.

(2)

Regulation (EC) No 810/2009 of the European Parliament and of the Council (2) provides for the procedures and conditions for issuing visas for transit through, or intended stays on, the territory of the Member States not exceeding 90 days in any 180-day period.

(3)

Common guidelines are required to ensure a fully harmonised implementation of the Agreement by the diplomatic missions and consular posts of the Member States and to clarify the relationship between the provisions of the Agreement and the provisions of the legislation of the Parties to the Agreement that continue to apply to visa issues not covered by the Agreement.

(4)

It is appropriate to establish the position to be taken on the Union's behalf within the Joint Committee with regard to the adoption of common guidelines for the implementation of the Agreement.

(5)

This Decision constitutes a development of the provisions of the Schengen acquis in which the United Kingdom does not take part, in accordance with Council Decision 2000/365/EC (3); the United Kingdom is therefore not taking part in the adoption of this Decision and is not bound by it or subject to its application.

(6)

This Decision constitutes a development of the provisions of the Schengen acquis in which Ireland does not take part, in accordance with Council Decision 2002/192/EC (4); Ireland is therefore not taking part in the adoption of this Decision and is not bound by it or subject to its application.

(7)

In accordance with Articles 1 and 2 of Protocol No 22 on the position of Denmark, annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union, Denmark is not taking part in the adoption of this Decision and is not bound by it or subject to its application,

26.10.2017   

EN

Official Journal of the European Union

L 276/60

(1)

On 10 July 2014, the Council adopted Decision 2014/450/CFSP.

(2)

On 17 October 2017, the United Nations Security Council Committee established pursuant to United Nations Security Council Resolution 1591 (2005) updated the information relating to one person subject to restrictive measures.

(3)

The Annex to Decision 2014/450/CFSP should therefore be amended accordingly,

26.10.2017   

EN

Official Journal of the European Union

L 276/62

(1)

By Implementing Decision 2014/715/EU (2), the Commission identified Sri Lanka as a country that it considers a non-cooperating third country in the fight against illegal, unreported and unregulated (‘IUU’) fishing, pursuant to Article 31(1) of Regulation (EC) No 1005/2008. In that Decision, the Commission provided the reasons for which it considered that this country failed to discharge its duties under international law, as flag, port, coastal or market State, to take action to prevent, deter and eliminate IUU fishing.

(2)

By Implementing Decision (EU) 2015/200 (3), the Council included Sri Lanka in the list of non-cooperating countries established by Council Implementing Decision 2014/170/EU (4).

(3)

Article 18(1)(g) of Regulation (EC) No 1005/2008, precludes the importation into the Union of fishery products accompanied by a catch certificate validated by the authorities of a flag state identified as a non-cooperating third country in the fight against IUU fishing.

(4)

Following the identification as a non-cooperating third country, Sri Lanka endeavoured to take concrete measures in order to remedy the identified failures.

(5)

On the basis of the information obtained by the Commission, it appears that Sri Lanka has implemented the relevant international law obligations and adopted an adequate legal framework for fighting against IUU fishing. It has established an adequate and efficient monitoring, control and inspection scheme by introducing logbooks to record catch data and radio call signs for fishing vessels, and equipping the entire high seas fleet with a vessel monitoring system (VMS). It has also created a deterrent sanctioning system, revised its fisheries legal framework and ensured the proper implementation of the catch certification scheme. Sri Lanka has furthermore steadily improved its compliance with Regional Fisheries Management Organisations (RFMO) recommendations and resolutions, such as port state control measures. It has transposed RFMO rules into Sri Lankan law and has adopted its own National Plan Of Action against IUU fishing, in line with the International Plan of Action against Illegal, Unreported and Unregulated fishing of the United Nations.

(6)

It therefore appears that Sri Lanka has implemented the relevant international law obligations and that the actions undertaken by Sri Lanka as a flag State are sufficient to ensure compliance with the provisions of Articles 94, 117 and 118 of United Nations Convention on the Law of the Sea and Articles 18, 19, 20 and 23 of United Nations Fish Stocks Agreement.

(7)

It may therefore be concluded that the situation that warranted the identification of Sri Lanka as a non-cooperating third country has been rectified and that Sri Lanka has taken concrete measures capable of achieving a lasting improvement of the situation.

(8)

As a consequence, the Council adopted Implementing Decision (EU) 2016/992 (5) removing Sri Lanka from the list of non-cooperating countries.

(9)

In those circumstances Implementing Decision 2014/715/EU should be repealed with effect from the entry into force of Implementing Decision (EU) 2016/992.

(10)

This Decision does not preclude any possible future step which may be taken by the Union, in accordance with Regulation (EC) No 1005/2008, in the event that Sri Lanka fails to fulfil the duties incumbent upon it under international law as flag, port, coastal or market State, to take action to prevent, deter and eliminate IUU fishing.

(11)

The measures provided for in this Decision are in accordance with the opinion of the Committee for Fisheries and Aquaculture of 28 February 2017,

26.10.2017   

EN

Official Journal of the European Union

L 276/64

(1)

On 23 September 2013, the Authority received a complaint alleging that Íslandsbanki hf. (‘ISB’) and Arion Bank hf. (‘Arion’) had been granted unlawful state aid through long-term funding at favourable interest rates by the Central Bank of Iceland (‘CBI’) (1).

(2)

By letter dated 23 October 2013, the Authority sent a request for information to the Icelandic authorities (2), to which the Icelandic authorities replied on 17 January 2014 (3). The case was subsequently discussed at a meeting between representatives of the Authority and of the Icelandic authorities in Reykjavík in May 2014. The discussions were followed up with a letter dated 5 June 2014 (4). The case was again discussed at a meeting between representatives of the Authority and of the Icelandic authorities, including a representative from the CBI, in Reykjavík in February 2015. These discussions were followed up with a letter dated 24 February 2015 (5), to which the Icelandic authorities replied on 1 April 2015 (6).

(3)

By Decision No 208/15/COL of 20 May 2015, the Authority initiated the formal investigation procedure into alleged unlawful state aid granted to ISB and Arion through loan conversion agreements on allegedly preferential terms. By letter dated 28 August 2015 (7), the Icelandic authorities commented on the Authority's decision. On the same date, the Authority also received comments from one of the two alleged beneficiaries, i.e. Arion (8).

(4)

On 24 September 2015, the decision to initiate the formal investigation procedure was published in the Official Journal of the European Union and in the EEA Supplement to it (9). By letter dated 5 October 2015, the CBI submitted comments to the opening decision (10).

(5)

By letter dated 14 June 2016, the Authority requested additional information from the CBI, ISB and Arion (11). The Icelandic authorities provided the requested information by letter dated 20 September 2016 (12).

(6)

The measures in question are linked to the CBI's collateral and securities lending. As part of its role as a central bank and lender of last resort, and in line with the monetary policy of other central banks, the CBI provides short-term credit facilities to financial undertakings in the form of collateral loans, in accordance with the provisions of CBI rules pertaining thereto. Financial institutions have the option of requesting overnight loans or seven-day loans against collateral considered to be eligible by the CBI.

(7)

In 2007 and 2008, collateral lending increased steadily, and the CBI became a major source of liquidity for financial undertakings. Collateral loans peaked on 1 October 2008, just before the collapse of the banks, when the CBI had loaned ISK 520 billion to financial institutions. Thus, at the time of the collapse of the three commercial banks (Landsbankinn, Glitnir and Kaupthing) in October 2008, the CBI had acquired considerable claims against these domestic financial undertakings, which were backed by collateral of various types. At that time, nearly 42 % of the collateral for CBI loan facilities took the form of Treasury guaranteed securities or asset-backed securities, while some 58 % of the underlying collateral consisted of bonds issued by Glitnir, Kaupthing, and Landsbankinn (13).

(8)

With the collapse of Glitnir in 2008, the CBI's claims became due and payable, thus making the CBI a creditor of the failed bank. By decision of the Financial Supervisory Authority (‘FME’) in October 2008, in principle all domestic assets and liabilities (save for some excluded assets and liabilities) of Glitnir's were transferred to ISB, including Glitnir's outstanding liabilities to the CBI, which amounted to approximately ISK 55,6 billion, as well as indirectly the ownership of the underlying collateral (the mortgage loan portfolio) (14).

(9)

As the debt with the CBI consisted of short-term collateralised lending, instant repayment would have had a serious impact on ISB's liquidity position and could have jeopardised the restructuring of the bank. According to the CBI, the alternative would have been for the CBI to collect the debt, which would have left the CBI with the mortgage loan portfolio. This would have been difficult for a central bank to manage. Selling the mortgage loan portfolio at the time was also not considered an option, taking into account the financial crisis and the very few potential purchasers on the market.

(10)

Therefore, ISB sought to renegotiate the debt with the CBI, in order to convert it into a long-term debt with a reasonable amortisation profile, to avoid a further negative impact on ISB's liquidity position. Following negotiations between ISB and the CBI, an agreement was reached on 11 September 2009, resulting in ISB issuing a stand-alone bond to the CBI in the amount of ISK 55,6 billion. The bond was asset-backed with the same, or similar, mortgage loan portfolio as the covered bonds that were issued by Glitnir in the past. The bond is over-collateralised with a loan-to-value (‘LTV’) ratio of 70 % (15). The bond's maturity is 10 years, with an interest rate of 4,5 %, CPI linked (i.e. consumer price-indexed).

(11)

In October 2008, it was clear that Kaupthing could no longer be saved and the FME therefore took over the operations of the bank. In line with the Act No 125/2008 on the Authority for Treasury disbursements due to Unusual Financial Market Circumstances etc. (the ‘Emergency Act’), which was passed on 6 October 2008, the FME decided to split Kaupthing into an old and a new bank. The new bank, which later became Arion, in principle took over most domestic assets and liabilities. However, the secured liabilities towards the CBI and the respective collateral, including the housing loan portfolio, were not transferred (16). The old bank was placed under the supervision of a resolution committee and later became subject to winding-up procedures, with the aim of eventually closing all operations.

(12)

Kaupthing, the Government and Arion reached an agreement on 3 September 2009 regarding the capitalisation of Arion and the basis for compensation from Kaupthing to Arion (the ‘Kaupthing capitalisation agreement’). According to this agreement, Kaupthing had the option of acquiring control of Arion by subscribing to new share capital and was to pay for the new share capital with the old bank's own assets (i.e. the assets that had not been transferred pursuant to the FME decision as described above).

(13)

Before Kaupthing could decide whether it would acquire a majority stake in Arion, an agreement needed to be reached with the CBI on the settlement of the outstanding claims as some of the assets it would need to pay for the new share capital had been placed as collateral against loans provided by the CBI to Kaupthing, including the housing loan portfolio. Therefore, on 30 November 2009, the Ministry of Finance, the CBI and the Kaupthing Resolution Committee entered into an agreement on the settlement of the CBI's claims against Kaupthing (the ‘settlement agreement’). The settlement of overnight loans was the subject of Article 3 of the settlement agreement and there the parties agreed that Arion Bank would assume Kaupthing's debt towards the CBI by issuing a bond in the amount of approximately ISK […] (*1) billion, in a specific form attached to the agreement as Appendix II, with the CBI in turn assigning the housing loan portfolio to Arion.

(14)

On 22 January 2010, Arion and the CBI concluded a loan agreement, which, according to the CBI and Arion, represented the formal completion of Article 3 of the settlement agreement and the capitalisation agreement, i.e. when the creditors of Kaupthing became owners of Arion. The loan agreement replaced the aforementioned bond. The loan agreement essentially reflected the terms of the bond, except that the principal amount of the loan agreement was denominated in EUR, USD and CHF instead of ISK. This change in currency denomination was in line with the terms of the settlement agreement which provided that, despite the denomination of the principal, Arion should pay interest and instalments in foreign currencies to the extent the bank was able to. The settlement agreement also stipulated that if Arion was not able to pay in foreign currencies, and wished instead to pay in ISK, it had to submit a written reasoned application to the CBI.

(15)

The loan agreement provided for a seven-year loan, extendable by two three-year terms, for an amount of EUR […] million, USD […] million and CHF […] million. Arion was permitted to change the combination of the currencies in which the loan was to be repaid. The interest payable was EURIBOR/LIBOR + 300 bps. The housing loan portfolio of Arion served as collateral to the CBI.

(16)

According to the complainant, the loan agreements between ISB, Arion and the CBI were not assessed in the Authority's decisions approving restructuring aid to ISB and Arion (17). Since the measures were not addressed in these cases, the complainant considers it important to obtain the opinion of the Authority on (i) the compatibility of these additional alleged aid measures with the EEA Agreement, and (ii) the consequences of the failure by the Icelandic authorities to notify these measures.

(17)

The complainant alleges that, at the time the CBI entered into the loan agreements with Arion and ISB, other banks in Iceland were not given the opportunity to receive such financing from the CBI or other government agencies. The complainant therefore argues that the aid was selective as it was granted exclusively to certain financial institutions competing on the Icelandic banking market. According to the complainant, by granting a loan to ISB, the bank was granted aid to avoid enforcement by the CBI on the covered bond issue; and in Arion's case, the loan was granted to secure an appropriate balance on the bank's currency risk. The complainant argues that other financial institutions, which did not receive such aid, were forced to sell off assets in markets that favoured buyers.

(18)

According to the complainant, the loan agreements gave ISB and Arion a clear advantage in the form of long-term funding with favourable interest rates below market rates and which were not available to other market participants. According to the complainant, no private investor would have entered into such agreements at this turbulent time on the financial markets. In order to substantiate its claim that the interest rates were below market rates at the time, the complainant submitted credit default swap (‘CDS’) spreads of the Icelandic government in 2009 and interest rates in 2009 on bond issues HFF150224 and HFF150434 by the Icelandic Housing Financing Fund (‘HFF’). The complaint maintains that the measures strengthened ISB and Arion on the banking market and therefore affected the position of other market participants.

(19)

Finally, the complainant argues that the restructuring plans of ISB and Arion, implemented by the Icelandic government and which the Authority found compatible aid pursuant to Article 61(3)(b) of the EEA Agreement, were sufficient to remedy the disturbance in the Icelandic economy. According to the complainant, the additional aid measures implemented by way of the abovementioned agreements were not necessary, appropriate or proportionate to restore the Icelandic banking system and therefore entail incompatible state aid.

(20)

In Decision No 208/15/COL, the Authority preliminarily assessed whether the short-term credit facilities provided by the CBI to Glitnir and Kaupthing, as well as the loan agreements concluded between the CBI and both Arion and ISB, could constitute state aid within the meaning of Article 61(1) of the EEA Agreement; and, if so, whether the state aid could be considered compatible with the functioning of the EEA Agreement.

(21)

With regard to CBI's short-term collateral lending to banks and other financial institutions, the Authority found that the conditions set out in the Banking Guidelines (18) concerning liquidity assistance and central bank facilities were fulfilled. Accordingly, the Authority concluded that the short-term credit facilities provided by the CBI to Glitnir and Kaupthing did not involve state aid.

(22)

However, with respect to the loan agreements between the CBI and both Arion and ISB on allegedly favourable terms, the Authority came to the preliminary conclusion that it could not be excluded that these constitute state aid within the meaning of Article 61(1) of the EEA Agreement. The following aspects were identified in Decision No 208/15/COL:

(23)

According to the Authority, further evidence needed to be provided in order to be able to determine whether the lending terms could be regarded as compatible with the functioning of the EEA Agreement.

(24)

Consequently, following its preliminary assessment, the Authority had doubts whether the measures in question and the lending terms in particular constituted state aid, and if so, whether they could be found to be compatible with the functioning of the EEA Agreement.

(25)

The CBI notes that the restructuring of the Icelandic financial system, its legal foundation, and the government's execution of it, have been previously addressed by the Authority, inter alia, in the ISB and Arion restructuring aid decisions. According to the CBI, it is not logical to take the measures under investigation in this case out of their context and to assess them as stand-alone instruments.

(26)

According to the CBI, it is unrealistic for a central bank to enforce collateral like the one in question in the case of Kaupthing (Arion) and ISB. In appropriating such collateral, the CBI would have taken on the role of a commercial bank with one of the largest household loan portfolios in Iceland. This would have been inconsistent with its role as a central bank. There was also an important risk of destabilising the operations of Arion and ISB, which would have jeopardised financial stability. The Authority must bear in mind that the CBI has a legal obligation to promote financial stability. If the CBI had collected the claim on ISB, ISB's liquidity would have been rendered too weak to operate as a healthy bank and consequently the CBI would not have been in a position to collect all of its claim.

(27)

The CBI notes that the Banking Guidelines unfortunately do not address what happens when claims stemming from monetary policy operations fall into default and a central bank is forced to take steps to collect claims and appropriate collateral assets. The CBI argues that the conversion of the CBI's claims into loan agreements should be considered as a normal continuation of creditors' measures aiming to maximise recoveries of claims stemming from short-term credit facilities and not as new funding provided to Arion and ISB.

(28)

With respect to whether the loan agreements conferred an advantage on the banks, the CBI first argues that the initial delay in payments did not involve state aid, given the exceptional circumstances prevailing in Iceland after the collapse of the banking system in October 2008. The settlement of payments with ISB in September 2009 and with Kaupthing in November 2009 cannot be considered a delay, according to the CBI, as Iceland was undergoing a comprehensive bank restructuring with the assistance of the IMF and there was a high degree of uncertainty about the valuation of the banks' assets.

(29)

The CBI highlights that is has the legal obligation to preserve financial stability and to supervise credit institutions' foreign exchange balances. Therefore, the CBI had a legal obligation to address the severe situation prevailing at the time. Concluding the loan agreements was the best rational economic decision under these circumstances. The CBI points out that not only would it have been inconsistent with the role as a central bank to appropriate the collateral, but it would also ultimately have resulted in the CBI recovering less of the short-term debt.

(30)

In addition, according to the CBI, the terms of the loan agreements, i.e. the interest rates and collateral, were favourable to the CBI. The CBI refers to available information on issued instruments worldwide and also to the terms of other instruments entered into by the parties at that time (Arion, ISB, the CBI, other domestic financial institutions, and the State) (19). Therefore, according to the CBI, the terms of the loan agreements were in both cases fully consistent with normal market terms at the time, and therefore fully in line with the market economy investor principle.

(31)

With respect to whether these loan agreements were selective, the CBI argues that all undertakings in a comparable legal and factual situation were treated equally. In this regard, the CBI notes that Straumur, a private Icelandic investment bank, also concluded an agreement with the CBI on the settlement of its short-term debt (20). Moreover, according to the CBI, MP Bank was not in a similar factual or legal situation as its short-term debts were not secured with assets comparable to the housing loan portfolio but with public securities such as Treasury instruments and similar secure instruments, i.e. easily tradable assets with a set value and no costs involved or associated with appropriation. Therefore, the CBI rejects the assertion that other banks in Iceland were not given the opportunity to receive such financing from the CBI or other government agencies.

(32)

Finally, the CBI notes that the Authority must consider that during the period when the loan agreements were concluded, there was de facto no competition between Icelandic financial undertakings and other financial undertakings in the EEA. In November 2008, the Icelandic Parliament adopted Act No 134/2008, amending the Foreign Exchange Act No 87/1992, which imposed restrictions on cross-border capital movements and foreign exchange transactions related thereto, thus making it impossible for foreign financial entities to compete on the Icelandic market (21). Therefore, the CBI argues that the measures were not liable to distort competition and affect trade between the Contracting Parties to the EEA Agreement.

(33)

On the basis of the above, the CBI argues that the conclusion of the loan agreements cannot constitute state aid within the meaning of Article 61(1) of the EEA Agreement.

(34)

Should the Authority nevertheless consider the measures to constitute state aid, the CBI argues that the measures must be considered compatible with the EEA Agreement on the basis of its Article 61(3)(b), as they formed an integral part of the measures that were necessary, proportionate and appropriate to remedy a serious disturbance in the Icelandic economy and thus were directly linked to the restructuring aid measures approved by the Authority in its Arion and ISB restructuring aid decisions.

(35)

Arion also argues that the measures under investigation in this case cannot be taken out of their context and assessed as stand-alone instruments. Arion suggests that the Authority has already investigated and approved the restructuring and capitalisation of Arion in its Arion restructuring aid decision.

(36)

Arion notes that denominating the loan in foreign currencies instead of ISK was in line with the terms of the settlement agreement, which provided that Arion should pay interest and instalments in foreign currencies to the extent the bank was able to and that it was only allowed to pay in ISK in exceptional circumstances. Arion also notes that Article 4 of the settlement agreement provided that the borrower may, with the permission of thelender, change the denomination of the debt in part or full. The terms of the loan agreement are therefore fully in accordance with the terms of the settlement agreement. Arion highlights that the Authority already reviewed and approved the terms of the settlement agreement in its Arion restructuring aid decision (22).

(37)

According to Arion, the Authority's description in Decision No 208/15/COL that without the housing loan portfolio Arion's position would have been ‘slim’, is incorrect. According to Arion, the housing loan portfolio was indeed a valued asset as it included loans of some of Arion's core clientele and had also been serviced by Arion. Pursuant to the settlement agreement (and not the FME's decision), Kaupthing was able to transfer the housing loan portfolio to Arion as part of Arion's capitalisation. In the absence of Article 3 of the settlement agreement (and thus in the absence of the transfer of the housing loan portfolio), however, other assets would have replaced the housing loan portfolio in order to fulfil the requirements of capitalisation and restructuring of Arion.

(38)

According to Arion, the position of the CBI could be qualified as that of a private creditor enforcing claims against Kaupthing, as detailed in the settlement agreement, in accordance with the applicable rules governing winding-up procedures (23). The assignment of the housing portfolio pursuant to the settlement agreement and the conclusion of the loan agreement were carried out on terms fully consistent with normal market terms at the time. Consequently, the conduct of the CBI meets the requirements of the private creditor test. The CBI therefore did not confer upon Arion any advantage that could in any way be considered state aid.

(39)

According to Arion, the main points that should be taken into consideration when assessing whether a hypothetical private creditor would have entered into the settlement agreement and the loan agreement can be summarised as follows:

(40)

Since the Authority, in Decision No 208/15/COL, considered it difficult to determine the appropriate benchmarks for interest rates during the financial crisis, Arion has provided information on covered bond and senior unsecured bond issuances by banks in Europe during the period in question. Since the loan provided by the CBI is secured primarily with mortgages, Arion argues that it is comparable to covered bonds that were issued by European banks during 2009 using residential mortgages as security. According to Arion, the dataset it provided (24) demonstrates that funding spreads European banks were paying ranged between 0,1 % and 1,90 % over interbank rates, with a median spread of 0,72 %. The highest rates for covered bonds were paid by the Bank of Ireland in September 2009 (1,9 % over interbank rates) and EBS Mortgage finance from Ireland (1,75 % overinterbank rates) in November 2009. According to Arion, it is difficult to see how a debt instrument secured with mortgages and other high quality assets, and bearing an interest rate of LIBOR + 3,00 %, could be seen as state aid, while at the same time the highest funding costs of a European bank with mortgage collateral was interbank rates + 1,9 %.

(41)

According to Arion, the change made in the loan agreement from the terms of the settlement agreement relating to the denomination of the principal in EUR, USD and CHF, instead of ISK, was favourable to the CBI. Arion notes that stringent limitations on cross-border movement of capital and related foreign exchange transactions were imposed in Iceland since the banking system collapsed in the autumn of 2008. Applying the private creditor test in these circumstances can only result in the conclusion that a private creditor would have preferred a denomination in foreign currencies rather than in ISK. Such a change in denomination would therefore be to the advantage of the creditor, not the debtor.

(42)

Arion also draws a comparison with a settlement agreement (‘the LBI agreement’) that was concluded between the ‘new’ Landsbankinn (‘NBI’), and the ‘old’ Landsbankinn (‘LBI’) in December 2009. The LBI agreement entailed the issue of a senior secured bond, denominated in EUR, GBP and USD, in the amount of ISK 247 billion in foreign currency for a term of 10 years by NBI to LBI. In addition, a contingent bond of ISK 92 billion in foreign currency was issued early in 2013. These senior secured bonds were a consideration for the assets and liabilities transferred from LBI on 9 October 2008 with the decision of the FME on the disposal of assets and liabilities from LBI to NBI. These senior secured bonds mature in October 2018 and do not have instalment payments during the first five years. The interest rates are EURIBOR/LIBOR + 175 bps for the first five years and EURIBOR/LIBOR + 290 bps for the remaining five years. They are secured by pools of loans to customers of Landsbankinn (25).

(43)

According to Arion, the terms of the LBI agreement can be viewed as directly comparable to the terms in the loan agreement. The differences can be summarised as follows:

(44)

The above differences between these two cases are, according to Arion, all favourable to the loan agreement and the CBI, i.e. higher interest rate, lower principal amount and stronger collateral pool, in spite of the fact that the lender in this case is a private party. This indicates that the terms of the funding provided to Arion under the loan agreement are in line with prevalent market terms at the time.

(45)

In summary, Arion thus argues that the conclusion of the loan agreement between the CBI and Arion cannot constitute state aid within the meaning of Article 61(1) of the EEA Agreement.

(46)

Should the Authority, despite the arguments presented above, consider that the measures constitute state aid, Arion argues that these measures are compatible with the EEA Agreement on the basis of its Article 61(3)(b).

(47)

As the measures in question formed an inseparable part of the final capitalisation of Arion and the restructuring plan of Arion submitted to the Authority, Arion argues that these measures cannot be separated from the overall assessment made by the Authority in that case. They are therefore covered by the Authority's Arion restructuring aid decision.

(48)

Arion is also of the opinion that, if the Authority considers it possible to revisit a specific part of a transaction that has already been reviewed and approved by the Authority in the Arion restructuring aid decision, then the Authority should take into consideration the full factual and legal situation. The Authority's assessment on the compatibility of the measures in question should thus be in line with the assessment in the Arion restructuring aid decision, and in particular on whether the criteria of the applicable state aid guidelines were met.

(49)

ISB provided information concerning the conditions of similar asset-backed bonds in Europe at the time of the conclusion of the agreement with the CBI. According to ISB, similar asset-backed bonds in Europe were trading at a 40–80 bps premium to state guaranteed papers at the time. ISB provided a graph which shows data from 2009 for three countries, i.e. France, Germany and Spain, on the spread difference between covered bond spreads and sovereign spreads. The iBoxx (26) covered spreads are a weighted average of all outstanding covered bonds from those respective countries with an average duration of the indices in the range of five to seven years.

(50)

As can be seen from the graph, the spread has fluctuated substantially during this period and is e.g. currently negative in the case of Spain. In 2009, the spread difference for these three countries was in the range of 40–160 bps.

(51)

In the following chapters, the Authority will assess whether the loan agreements concluded between the CBI and both ISB and Arion involve state aid within the meaning of Article 61(1) of the EEA Agreement.

(52)

A measure constitutes state aid within the meaning of Article 61(1) of the EEA Agreement if the following conditions are cumulatively fulfilled: the measure (i) is granted by the State or through State resources; (ii) confers an economic advantage on an undertaking; (iii) is selective; and (iv) is liable to distort competition and affect trade between Contracting Parties.

(53)

As a preliminary point, it should be reminded that there is no blanket exemption of monetary policy from the application of the state aid rules (27). Indeed, the exclusion of liquidity assistance from the application of state aid law, as mentioned in paragraph 21 above, is limited to measures fulfilling the conditions enumerated in paragraph 51 of the Authority's 2008 Banking Guidelines and paragraph 62 of the Authority's 2013 Banking Guidelines (28). This does not imply that all actions by central banks are excluded from the application of the stateaid rules. In the present case, the Authority considers that the provision of long-term loans by the CBI does not comply with the conditions set out in the aforementioned paragraphs of the 2008 and 2013 Banking Guidelines, since the measures were connected to the restructuring measures provided to the two banks. Therefore, the Authority must assess the measures on the basis of the conditions set out in Article 61(1) of the EEA Agreement.

(54)

According to Article 61(1) of the EEA Agreement, a measure must be granted by the State or through State resources in order to constitute state aid.

(55)

The State, for the purpose of Article 61(1) of the EEA Agreement, covers all bodies of the public administration, from the central government to the city level or the lowest administrative level as well as public undertakings and bodies (29).

(56)

The measures under examination take the form of loan agreements between the CBI and Arion and ISB on allegedly favourable terms.

(57)

In order to determine whether the provision of long-term loans by the CBI involves state resources, it needs to be assessed whether measures taken by a central bank can be regarded as imputable to the State. Central banks are in general independent from the central government. However, it is irrelevant whether or not an institution within the public sector is autonomous (30). Moreover, it is generally accepted that central banks do perform a public task. The Authority notes that there is well-established case law that financial support provided by an institution serving a public purpose can result in the granting of state aid (31). The public support granted by a central bank can thus also be regarded as being imputable to the State and thus qualify as state aid (32). Indeed, according to the 2013 Banking Guidelines, funds provided by a central bank to specific credit institutions generally imply the transfer of State resources (33).

(58)

However, beyond these remarks, the question of whether the loan agreements in question were granted by the State or through state resources can be left open, given the conclusion reached in the following section that the measures did not confer an economic advantage on the banks.

(59)

In order to constitute state aid within the meaning of Article 61(1) of the EEA Agreement, the measures must confer an advantage upon an undertaking.

(60)

An advantage, within the meaning of Article 61(1) of the EEA Agreement, is any economic benefit which an undertaking would not have obtained under normal market conditions, thus placing it in a more favourable position than its competitors. Only the effect of the measure on the undertaking is relevant, and not the cause or objective of the State intervention (34). For it to constitute aid, the measure can take the form of a positive economic advantage as well as a relief of economic burdens. The latter is a broad category comprising any measure mitigating the charges that would normally be borne from the undertaking's budget. The question of whether the conclusion of the loan agreements could be regarded as granting ISB and Arion an advantage will ultimately depend on whether a private creditor of a comparable size to that of the public body, operating in the same market conditions, would have granted a similar loan on similar conditions.

(61)

In order to determine whether a public body has acted like any market economy operator in a similar situation, only the benefits and obligations linked to the role of the State or public body as an economic operator — to theexclusion of those linked to its role as a public authority — are to be taken into account (35). Moreover, in order to determine whether a state intervention is in line with market conditions, it must be examined on an ex ante basis, only taking into account the information available at the time the intervention was decided upon. In addition, in the absence of specific market information on a given debt transaction, the debt instrument's compliance with market conditions may be established on the basis of a comparison with comparable market transactions, that is to say through benchmarking.

(62)

The private creditor test, developed and refined by the courts of the European Union (36), serves to establish whether the conditions under which a public creditor's claim is to be repaid, possibly by rescheduling payments, constitutes state aid. When the State is in the position, not as an investor or a promoter of a project, but as a creditor trying to maximise the recovery of an outstanding debt, lenient treatment alone, in the form of deferral of payment, may not be sufficient to presume favourable treatment in the sense of state aid. In such circumstances the conduct of the public creditor is to be compared with that of a hypothetical private creditor in a comparable factual and legal situation. The crucial question is whether a private creditor would have granted similar treatment to a debtor in similar circumstances.

(63)

Prior to assessing the loan agreements, the question arises as to whether the initial delay in settling payments, which is understood to have lasted from around October 2008 until late 2009, may involve state aid. In general, decisions by public bodies to tolerate late payments on a loan may entail an advantage to the debtor and involve state aid. While a temporary deferral of payment would probably correspond to the conduct of a private creditor and thus not involve state aid, such conduct, initially consistent with market conditions, could turn into state aid in cases of protracted delays in payment (37).

(64)

From the point of view of a private creditor, enforcement of a claim that has become due is the self-evident norm. This also applies if the debtor undertaking is in financial difficulties, as well as in the case of insolvency. Private creditors will not normally be willing in such circumstances to accept further deferral of payment if this does not bring them any clear advantage. On the contrary, once a debtor runs into financial difficulty, further loans would only be granted to the debtor under stricter terms, e.g. at a higher interest rate or with more comprehensive securities, as repayment is endangered. Exceptions may be justifiable in individual cases where non-enforcement seems to be the economically more sensible alternative. This would be the case when non-enforcement offers clearly improved prospects of collecting a substantially higher proportion of the claims in comparison with other possible alternatives or if even greater consequential losses can be averted in this way. It can be in the interest of a private creditor to keep the business of the debtor company running instead of liquidating its assets and thus, under certain circumstances, only collecting a part of the debt. When a private creditor accepts to refrain from enforcing his claim in full, he will normally require the debtor to provide additional securities. When this is not possible, for instance in cases of debtors in financial difficulty, the private creditor will seek assurances of maximum compensation should the financial condition of the debtor later improve. If insufficient securities or commitments are made by the debtor, a private creditor would generally not accept to conclude debt rescheduling agreements or provide the debtor with additional loans.

(65)

With respect to the initial delay in settling payments, the CBI argues that settling payments with ISB in September 2009 and with Kaupthing in November 2009 cannot be considered a delay given the exceptional circumstances prevailing in Iceland after the collapse of the banking system in October 2008. During the period from the collapse until the settlement of the claims, Iceland was undergoing a comprehensive bank restructuring with the assistance of the IMF and there was considerable uncertainty about the fair valuation of the banks' assets.Therefore, the CBI as the creditor of the banks needed time to properly evaluate the assets that served as collateral. The Authority has assessed these arguments and considers that the CBI acted in line with the private creditor test concerning the initial delay.

(66)

Further, the Authority needs to assess whether a private creditor holding similar short-term claims on the defaulting banks would have agreed to the transfer of the housing loan portfolios under the conditions set out above and to the subsequent conclusion of loan agreements with the new banks according to the same conditions.

(67)

The Authority notes that in the wake of Glitnir's and Kaupthing's collapse in the autumn of 2008, the CBI found itself in a position where it was unrealistic to expect to enforce collateral like the ones in question in the case of Arion and ISB. Taking into account that the loan portfolios constituted a large share of Arion's and ISB's customer base, appropriating such collateral could have jeopardised the financial stability of Arion and ISB and driven these financial undertakings into bankruptcy. Enforcing the collateral would have also entailed additional administrative expenses for the CBI. Moreover, if the loan portfolios had been offered for sale, the CBI would also have had no assurance of acceptable recovery, and it was highly unlikely that investors with sufficient capital strength would have been available to buy the portfolios, given the market situation in Iceland at the time. Therefore, appropriating the housing loan portfolios — either by enforcing the collateral or following bankruptcy — would have resulted in the CBI recovering a lower amount of the short-term debt in the end.

(68)

Faced with this situation, the CBI therefore chose to enter into the loan agreements to ensure full payment of its claims, with interest and without having to incur administrative expenses. The loan agreements were thus entered into to achieve maximum possible recovery at that time.

(69)

Based on these elements, the Authority considers that the CBI endeavoured to maximise the recovery of its claims when entering into the loan agreements.

(70)

The Authority also must assess whether the conditions attached to the loan agreements, and in particular the applicable interest rates, would have been sufficiently valuable to a private creditor to meet the requirement of the private creditor test.

(71)

In Decision No 208/15/COL, the Authority noted that it was difficult to determine the appropriate benchmarks for interest rates during the financial crisis. In response to this, ISB, Arion and the CBI have submitted additional information and comments.

(72)

ISB argues that the interest rates are in line with the interest rates of similar asset-backed bonds at the time. The ISB bond's maturity is 10 years, with an interest rate of 4,5 %, CPI linked (consumer price-indexed), and is over-collateralised with a LTV ratio of 70 %. The interest rate was set at about 50 bps on top of the state-guaranteed HFF bonds on the date of issue. In comparison, common rates in Europe at the time for similar asset-backed securities were at 40–80 bps above state-guaranteed papers. ISB also provided a graph which shows that the spread differences for France, Germany and Spain were in the range of 40–160 bps in 2009.

(73)

Similarly, Arion argues that its loan agreement with the CBI was concluded on market terms. Arion compares it, inter alia, to a comparable agreement concluded between NBI and LBI. Both agreements were concluded around the same time, i.e. end of 2009 and the beginning of 2010, and involved similar settlements of claims. The comparison shows that the terms of Arion's loan agreement were more stringent than those in the LBI agreement, involving a private lender. Indeed, it appears that the LBI agreement required lower interest rates, involved a higher principal amount and had weaker and less diversified collateral than the Arion loan agreement.

(74)

In its letter of 31 March 2015 (38), Arion provided additional information on covered bond and senior unsecured bond issuances by banks in Europe during the period of 1 January 2009 until 31 December 2010. Taking into account that the loan provided by the CBI is primarily secured with mortgages, Arion argues that it is comparable to covered bonds issued by European banks during 2009 using residential mortgages as security. Asmentioned above, according to the dataset provided by Arion, funding spreads European banks were paying ranged from 0,1 % to 1,90 % over interbank rates, with a median spread of 0,72 %. The highest rates for covered bonds were paid by Bank of Ireland in September 2009 (1,9 % over interbank rates) and EBS Mortgage from Ireland (1,75 % over interbank rates) in November 2009.

(75)

The CBI also argues that the terms of the loan agreements, i.e. the interest rates and collateral, were favourable to the CBI. According to the CBI, this is evident from the available information on issued instruments worldwide (as documented by Arion, see above) and also from the terms of other instruments entered into at the time, including the LBI agreement.

(76)

The Authority notes that the loan agreements concluded between the CBI and the banks bear an interest rate of LIBOR + 3,00 % and are collateralised with mortgages and other assets. As the information provided by ISB and Arion shows, this interest rate is well above the average interest rates for comparable debt instruments concluded at the time, and even exceed the highest funding cost of any other European banks at the time that had mortgages as collateral (i.e. Bank of Ireland, interbank rates + 1,9 %). The Authority considers that the information concerning comparable debt instruments provided by the banks is reliable and that it presents and accurate picture of market conditions at the time the loan agreements were concluded. Moreover, since these interest rates were agreed to by private parties, the Authority considers that they represent a more appropriate benchmark for determining market rates at the time than the CDS spreads and interest rates on HFF bonds cited by the complainant.

(77)

Concerning the loan agreement concluded with Arion, the Authority notes that the loan was denominated in foreign currencies instead of ISK. However, as noted by Arion, this change of denomination was in line with the terms of the settlement agreement, which provided that Arion should pay interest and instalments in foreign currencies to the extent the bank was able to and that Arion could, with the permission of the lender, change the denomination of the debt in part or full. As previously noted, the Authority has already reviewed and approved the terms of the settlement agreement in the Arion restructuring aid decision. Moreover, as noted by Arion, due to the stringent limitations in Iceland on cross-border movement of capital and related foreign exchange transactions, a private creditor would in all likelihood have preferred a denomination in foreign currencies rather than in ISK. Such a change in denomination would therefore be to the advantage of the creditor, not the debtor.

(78)

Considering the market parameters at the time and the evidence presented, the Authority concludes that the lending terms in general, and the interest rates in particular, of the loan agreements would have been equally acceptable to a private creditor finding himself in a comparable factual and legal situation.

(79)

In light of the above, the Authority concludes that the loan agreements between the CBI and, respectively, ISB and Arion did not confer an economic advantage upon ISB and Arion.

(80)

In order to qualify as state aid within the meaning of Article 61(1) of the EEA Agreement, the measure must be selective as well as liable to distort competition and affect trade between the Contracting Parties to the Agreement. However, given that the Authority concludes that no economic advantage was granted in the present case, and as the cumulative conditions for the existence of state aid are therefore not fulfilled, the Authority does not have to make any further assessment in this regard.

(81)

On the basis of the foregoing assessment, the Authority considers that the loan agreements the CBI concluded with ISB and Arion do not constitute state aid within the meaning of Article 61(1) of the EEA Agreement.