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Chapter 9: Financial services

In this chapter, rules for the authorization, operation and supervision of financial institutions and regulated markets are included. Guiding principles for operation of financial institutions across the EU are ‘Single passport’ and ‘home country rule’ and they apply in three major areas: banking services, investment services and insurance services.

The acquis stipulates requirements for authorization, operation and prudential supervision of credit institutions for banks and financial conglomerates. Requirements concerning the calculation of capital adequacy requirements that apply to credit institutions and investment firms are set out as well. Codified Banking Directive and Capital Adequacy Directive are ensuring application of the new international framework throughout the Union, replacing old requirements with more comprehensive and risk sensitive approaches so the banks can choose those that suit them best.

Deposit guarantee scheme has been developed to supplement supervision of financial conglomerates and credit institutions are required to join this scheme. Also, annual and consolidated accounts of banks and other financial institutions as well as the harmonization of certain provisions on the reorganization and winding up of credit institutions with branches in more than one Member State are regulated by the acquis.

Authorization, operation and supervision of life assurance and non-life insurance are regulated by several directives. Supplementary supervision of insurance group is established with supervision of reinsurers in their home country.

The directive on insurance mediation establishes possibility of mediation by natural and legal persons operating within the EU. When it comes to motor insurances several directives harmonize requirements concerning insurance against civil liability in respect of motor vehicles. Other directives regulate activities and supervision of institutions for occupational retirement provision.

Solvency II Directive introduces new risk based and pro-active solvency system for insurance companies as well as new supervisory set-up for individual insurance companies and insurance groups. The Directive on financial collateral arrangements has an aim to loosen as well as to harmonize formal requirements and procedures to create and enforce collateral costs across the EU. Part of the acquis also aims to reduce systematic risks linked to the insolvencies in payment and securities settlement systems.

In the field of securities markets and investment services there is a comprehensive regulatory regime that covers the authorization, operation and supervision of investment firms regulated markets. Protection for the investors is guaranteeing that all the prospectuses provide them with the clear and comprehensive information they need to make investment decisions. Minimum transparency requirements for listed companies have been also prescribed in the acquis. Administrative regime for prohibiting and prosecuting insider dealing and market manipulation is set out by the Directive on Market Abuse. Further on, legislation on investment funds sets out rules for the authorization, supervision, structure and activities of investment funds.

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