Answers to the European Commission on the ... - Eiopa - Europa

undertakings, which are subject <strong>to</strong> prudential requirements <strong>to</strong> cover
such risks. If such risks materialise, <strong>the</strong>y are likely <strong>to</strong> affect <strong>the</strong>
financial position of <strong>the</strong> separate regulated entities of <strong>the</strong> group as well.
Therefore, it is necessary <strong>to</strong> ensure that <strong>the</strong> entire group, including its
unregulated parts, is adequately capitalised, in addition <strong>to</strong> <strong>the</strong>
individual regulated group undertakings.
18.53 Since parent undertakings are in a position <strong>to</strong> make significant
decisions affecting <strong>the</strong> entire group, <strong>the</strong>n, regardless of <strong>the</strong>ir regulated
status, parent undertakings should also be subject <strong>to</strong> controls on
effective shareholder control, fitness and propriety of <strong>the</strong> Management,
and effective internal control and risk management mechanisms.
18.54 Group-wide supervision of groups carrying out <strong>the</strong>ir business under a
common brand is particularly necessary because of <strong>the</strong> reputation risk
<strong>to</strong> <strong>the</strong> regulated entities of <strong>the</strong> group by unacceptable policies of <strong>the</strong>
parent undertaking or its o<strong>the</strong>r subsidiaries (contagion).
18.55 A fur<strong>the</strong>r particularity of group supervision is that groups typically
consist of several legally separate entities, while <strong>the</strong> group might not
be a legal entity in itself.
18.56 In light of <strong>the</strong> increased significance of cross-border groups in Europe,
at least some of <strong>the</strong> above-mentioned issues require a lot of attention
being paid <strong>to</strong> so that a clearer, more consistent legal framework which
can effectively be applied across different Member States in Europe can
be achieved. 139
Role of <strong>the</strong> co-ordina<strong>to</strong>r in <strong>the</strong> IGD and FCD
18.57 Article 7 of <strong>the</strong> IGD provides for <strong>the</strong> exchange of information between
competent authorities, whereas Art. 4.2 grants <strong>the</strong> option of appointing
one competent authority <strong>to</strong> assume responsibility for exercising
supplementary supervision. O<strong>the</strong>r articles in <strong>the</strong> IGD assume cooperation
between supervisory authorities of insurance groups
operating in more than one EEA Member State. The Helsinki Pro<strong>to</strong>col
(HP) describes <strong>the</strong> role of a key co-ordina<strong>to</strong>r as a supervisor arranging
and managing <strong>the</strong> co-ordination of <strong>the</strong> activities necessary <strong>to</strong> carry out
<strong>the</strong> supplementary supervision.
18.58 CEIOPS notes that it will need <strong>to</strong> elaborate its views on any need for
additional supervision at <strong>the</strong> sub-group level at a later stage.
Stakeholders are never<strong>the</strong>less encouraged <strong>to</strong> provide <strong>the</strong>ir views also
on this issue when responding <strong>to</strong> this consultation.
18.59 The FCD goes fur<strong>the</strong>r in confirming <strong>the</strong> role of <strong>the</strong> co-ordina<strong>to</strong>r <strong>to</strong>
assume responsibility for exercising supplementary supervision. It also
specifies <strong>the</strong> extent of information <strong>to</strong> be exchanged between relevant
supervisors (Art. 12).
139 See Supervising <strong>European</strong> Financial Groups and Institutions, an analysis of alternative supervisory models
and <strong>the</strong>ir legislative implications, discussion paper by Erkki Sarsa – Ministry of Finance, Finland.
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