GENPRU 3.2 Third-country groups

GENPRU 3.2 implements in part article 183 of the Financial Groups Directive, article 1273 of the CRD and (in relation to BIPRU firms) article 143 of the BCD3.

The first question that must be asked about a third-country financial group is whether the EEA regulated entities in that third-country group are subject to supervision by a third-country competent authority, which is equivalent to that provided for by the Financial Groups Directive (in the case of a financial conglomerate) or the EEA prudential sectoral legislation for the banking sectoror the investment services sector (in the case of a banking and investment group). Article 18(1) of the Financial Groups Directive sets out the process for establishing equivalence with respect to third-country financial conglomerates and article 2127(1) and (2)3 of the CRD does so with respect to third-country banking and investment groups, except where the investment firms in the group are CAD investment firms only, in which case article 143 of the BCD applies3.

If the supervision of a third-country group by a third-country competent authority does not meet the equivalence test referred to in GENPRU 3.2.3 G,1 the methods set out in the CRD and EU CRR will apply or competent authorities may apply other methods that ensure appropriate supervision of the EEA regulated entities in that third-country group in accordance with the aims of supplementary supervision under the Financial Groups Directive or consolidated supervision under the applicable EEA prudential sectoral legislation.

If the supervision of a third-country group by a third-country competent authority does not meet the equivalence test referred to in GENPRU 3.2.3 G, a competent authority may, rather than take the measures described in GENPRU 3.2.4 G, apply, by analogy, the provisions concerning supplementary supervision under the Financial Groups Directive or, as applicable, consolidated supervision under the applicable EEA prudential sectoral legislation, to the EEA regulated entities in the banking sector, investment services sectorand (in the case of a financial conglomerate ) insurance sector.

The FCA3 believes that it will only be right to adopt the option in GENPRU 3.2.5 G in response to very unusual group structures.

GENPRU 3.2.8 R and GENPRU 3.2.9 R and GENPRU 3 Annex 2 set out rules to deal with the situation covered in GENPRU 3.2.5 G. Those rules do not apply automatically. Instead, they can only be applied with respect to a particular third-country group through the Part 4A permission of a in that third-country group.