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Liechtenstein Adopts Changes To Financial Conglomerate Law

by Ulrika Lomas, Tax-News.com, Brussels

15 October 2012


During a recent meeting, the Liechtenstein government adopted a report on consultation pertaining to the amendment of the Principality’s financial conglomerate law, as well as to corresponding changes to the country’s banking and alternative investment fund managers law.

According to the Liechtenstein government, a bill based on the consultation will implement the European Financial Conglomerate Directive (FICOD) 2011/89/EU, which replaced Directive 2002/78/EG. The FICOD aims at the supplementary supervision of regulated entities that form part of a financial conglomerate, i.e. groups with licenses in both the banking and the insurance sector, by focusing on potential risks of double gearing (multiple use of capital) and on 'group risks' (the risks of contagion, management complexity, risk concentration, and conflicts of interest).

The government explains that as a member of the European Economic Area, Liechtenstein is obliged to implement the latest directive, which is due to enter into force in the EU by June 2013.

The government emphasizes that the main aim of the regulation is to ensure a comprehensive and adequate supervision of financial conglomerates, by closing existing loopholes, thereby strengthening legal certainty.

The amendments to the financial conglomerate directive include: the addition of asset management companies in the threshold tests for identifying a conglomerate; a waiver for smaller groups if the relevant supervisor assesses the group risks to be negligible; and risk-based assessments in addition to existing definitions relating to size, in identifying financial conglomerates.

The amendments also allow for both sector-specific (banking and insurance) supervision and a supplementary supervision of the conglomerate’s parent entity, especially if it is a holding company. Under current rules, supervisors have to choose which type of supervision applies when a group acquires a significant stake in another sector and when the parent entity is a holding company.

TAGS: investment | holding company | law | banking | insurance | Liechtenstein | offshore | legislation | regulation | alternative investment

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