EC Examines Merger Approval Process For Finance Sector

by Ulrika Lomas, for LawAndTax-News.com, Brussels

14 September 2006

The European Commission has this week put forward a proposal that will tighten the procedures that Member States' supervisory authorities have to follow when assessing proposed mergers and acquisitions in the banking, insurance and securities sectors.

Current EU rules allow supervisory authorities to block proposed mergers and acquisitions if they consider that the 'sound and prudent management' of a target company could be put at risk.

The proposed new Directive, which amends various existing Directives in these sectors, will in particular clarify the criteria against which supervisors should assess possible M&A operations.

In particular, there would be a closed list of criteria on which the acquiring company should be assessed, such as reputation of the proposed acquirer, reputation and experience of any person that may run the resulting institution or firm, financial soundness of the proposed acquirer, compliance with relevant EU Directives, and risk of money laundering and terrorism financing.

Also, the proposed Directive reduces the assessment period from three months to 30 days and allows the supervisory authority to 'stop the clock' only once, under clear conditions.

This, it is claimed, will improve clarity and transparency in supervisory assessment and help to ensure a consistent handling of M&A requests across the EU.

Internal Market and Services Commissioner Charlie McCreevy announced that:

"These new rules mean that supervisory authorities will have to be clear, transparent and consistent when assessing cross-border mergers and acquisitions. They leave no room for political interference or protectionism. This has to be the way forward if we're serious about having a fully functioning Internal Market and enabling Europe's financial companies to compete globally."

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