Does the regulatory regime impose conditions for eligible owners of banks (e.g., with respect to major participations)?

Banking & Finance

Israel Small Flag Israel

Under the Banking Law in considering whether to grant a person with a permit holding or a permit control in a bank, the BoI has to take into account, among other things, the adequacy of the applicant to control or to hold the amount of shares requested, its business experience, its occupation and other business, its financial strength and integrity, the consequences of the permit on the current or future control over the bank; the plans of the applicant; the policy; public interests etc.

The BoI published a policy regarding the criteria for granting control permit in a bank. We note that not all existing control permits (most of which were issued before the policy) comply with the criteria and in addition the BoI may deviate from the criteria.

According to the policy in addition to the above considerations the BoI shall also consider the applicants personal and business integrity; investment strategy; potential conflict of interest with the bank. The policy addresses the requirement for a stable and permanent controlling core in the bank. The policy also sets out restrictions on how the means of control in the bank are held. The financial strength of the applicant will be checked with respect to different parameters. The main criteria are the ratio between the equity of the ultimate controlling shareholder (assets minus liabilities) and the value of the controlling stake which should be at least 150% (or 250% for small banks). Each controlling shareholder will be required to have additional equity of 100% from the means of control it purchases beyond the controlling stake.

Hungary Small Flag Hungary

Based on the Hungarian Banking Act any person with a qualifying holding in a financial institution shall be independent of any influences, which may endanger the financial institution’s prudent operation, have good business reputation and the capacity to provide reliable and diligent guidance and control of the financial institution. The acquisition of a qualifying direct or indirect holding (10%) in a credit institution or the increase a holding in a credit institution reaching 20%, 33% or 50% stake is subject to the HNB’s approval.

Latvia Small Flag Latvia

Yes, the regulatory regime imposes conditions for eligible owners of banks, most specifically, with regard to qualifying holdings. Among others, the following conditions apply.

Firstly, only the following may acquire qualifying holdings in a bank:

1) natural persons of legal age and with the capacity to act;

2) legal (registered) person;

3) the state or local governments.

Secondly, those who acquire qualifying holdings shall be identifiable, have an impeccable reputation, financial stability, as well as the legality of their financial resources shall be provable by documentary evidence.

Lithuania Small Flag Lithuania

The minimum number of founders of a bank is seven, except when a bank is established by a foreign or Lithuanian bank or by the Lithuanian Government. Each founder must also acquire at least 2% of the bank's share capital. Any person needs the permission of the Bank of Lithuania in order to acquire directly or indirectly 10% and more of shares or votes in a commercial bank.

As general rule, eligibility for the qualified bank’s owner is based on (1) the good repute of the owner, (2) good repute and experience of the person who will be the head of the bank, (3) the financial soundness and 4) absence of criminal record with regard to criminal offences, as listed in the law, (5) absence of negative impact on due operations of the bank following the completion of shareholding acquisition, as well as, other conditions.

The law also provides for the list of following entities that may not own shares in banks, which includes:

  • state institutions, except for the Lithuanian Government and municipalities;
  • institutions financed from the Lithuanian state budget;
  • banking subsidiaries or other subsidiaries of the bank;
  • an entity in which the bank's investment equals or exceeds 10% of its capital.

Poland Small Flag Poland

There are no specific conditions imposed; however, an owner of a bank must:

  • be in good financial standing; and
  • guarantee the proper performance of its rights and obligations in a manner securing the interest of the clients of the bank; and
  • ensure the observation by the bank of all capital- and risk-related requirements set out by applicable law.

In addition to the above there are also restrictions concerning the source of a bank’s share capital, i.e. it cannot come from a loan or credit facility or be derived from undocumented sources.

Romania Small Flag Romania

A natural or legal person or a group of natural and/or legal persons acting in concert, which holds directly or indirectly qualifying holdings (10% or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the bank) in a credit institution, are considered significant shareholders

The NBR’s regulations impose several criteria related to the significant shareholders’ evaluation: (i) the reputation of the significant shareholders; (ii) the financial situation of the significant shareholder; (iii) the compliance of the bank with prudential requirements; and (iv) suspicions of money laundering or terrorist financing.

No person may become a significant shareholder if falling certain situations (e.g.: is known or suspected, internally or internationally, as involved in money laundering or money laundering attempts activities or in terrorism financing and terrorism financing attempts).

In addition, the significant shareholders must have a good reputation and financial situation, in order to ensure a prudential management of the bank.

India Small Flag India

All banks in India, whether domestic or foreign, need to obtain a banking licence from the RBI in order to commence operations (see questions 2 and 5).

While the BR Act lists the requirements of a universal banking company to obtain a banking licence, the On Tap Guidelines, in addition to other procedural requirements for eligible promoters to promote a bank through a non-operative financial holding company (NOFHC) model state that eligible promoters (defined as persons having a successful record in banking and finance for at least 10 years), are:

  • individuals resident in India;
  • entities in the private sector that are owned and controlled by residents of India provided that if such entity has total assets of INR 50 billion or more, its non-financial business should not account for 40 per cent or more of assets or gross income; or
  • existing non-banking financial companies (NBFCs) that are ‘controlled by residents’ and compliant with specified income and asset tests.

It is not mandatory for the bank to be set up through a NOHFC in case the promoters are individuals or standalone promoters who do not have other group entities.

This NOFHC is to be registered with the RBI as an NBFC, and is required to hold the bank as well as other financial service companies of the promoter group. The capital structure of the NOFHC is required to consist of:

  • voting equity shares of 51 per cent held by promoters or companies forming part of the promoter group. If such shareholding is held by various individuals of the promoter group, each individual, together with his relatives and entities in which they collectively hold 50 per cent voting equity shares, can hold only up to 15 per cent of the voting equity shares of the NOFHC;
  • voting equity shares of 49 per cent must be held by public shareholders, where each individual, together with his relatives and entities in which they collectively hold 50 per cent voting equity shares, can hold only up to 10 per cent of the voting equity shares of the NOHFC; and
  • shareholding of the promoter group in the NOFHC should be only by individuals, non-financial service and core investment companies or investment companies in the promoter group (i.e., no financial services entity is an eligible shareholder in the NOFHC).

The bank is mandatorily required to be listed on a stock exchange within six years of commencement of business. Financial service entities whose shares are held by the NOFHC are not permitted to hold shares in the NOFHC.

The promoter and the promoter group/NOFHC is also required to hold a minimum of 40 per cent of the paid-up voting equity capital of the bank which shall be locked in for a period of five years. Any shareholding beyond this limit is required to be bought down to 40 per cent within five years of the date of commencement of business of the bank.

Additionally, no shareholder of a bank can exercise more than 10 per cent of the total voting rights in a bank irrespective of its actual shareholding. This may be raised at a later date to 26 per cent by the RBI. The 10 per cent voting limit applies to each person holding shares of the bank and affiliates, related parties and persons belonging to a common group are considered separate persons for this purpose.

Japan Small Flag Japan

Authorisation by the FSA is required to hold the voting rights of a bank that are at or above the threshold of 20% or 15%, as applicable (see No. 15). The applicant for such an authorisation is examined on whether (i) the sound and appropriate management of the services of the bank is unlikely to be impaired in light of particulars of the funds for the acquisition of the voting rights, the purpose of holding the voting rights, or any other particulars, (ii) the sound and appropriate management of the services of the bank is unlikely to be impaired in light of the financial condition, income and expenditures of the applicant and its subsidiaries, and (iii) the applicant has a sufficient understanding of the public nature of bank services and has sufficient social credibility.

Malta Small Flag Malta

Apart from the notification and approval requirements set out in our reply to Q15, eligible owners of banks must keep the MFSA informed of any changes to the information they would have submitted when applying to be approved as qualifying shareholders.

Nigeria Small Flag Nigeria

Under the CBN Code of Corporate Governance, ownership of a shareholding of 5% and above by any person in a bank shall be subject to the CBN's prior approval and the government's equity holding in any bank is limited to 10%. (See question 15).

Norway Small Flag Norway

Yes, the MoF has in individual cases imposed specific conditions on major shareholders. The conditions are imposed in order to control or reduce the relevant shareholder's influence on the bank. Note that in practice no private individual or corporate shareholder have been approved as holder of more than 25 percent of the share capital and voting rights of a Norwegian bank.

Portugal Small Flag Portugal

Banco de Portugal may oppose the plan to acquire or increase a qualifying holding if it considers that it has not been demonstrated that the proposed acquirer has provided incomplete information or fulfills the conditions to ensure the sound and prudent management of the credit institution – it shall assess:

a) the suitability of the proposed acquirer,

b) the reputation, professional qualification, independence and availability of the members of the management body of the credit institution, to be appointed as a result of the proposed acquisition,

c) the financial soundness of the proposed acquirer, in particular in relation to the type of business pursued or envisaged in the credit institution;

d) whether the credit institution will be able to comply and continue to comply with the applicable prudential requirements and, in particular where it belongs to a group, whether the group has a structure that makes it possible to exercise effective supervision, effectively exchange information with the competent authorities and determine the allocation of responsibilities among the competent authorities;

e) whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing is being or has been committed or attempted, or that the proposed acquisition could increase the risk thereof.

Qatar Small Flag Qatar

The QCB determines the ownership ratios and terms of natural and juristic persons of the shares of financial institution under the control and supervision of the QCB, and such ratios may not be exceeded, directly or indirectly, and each financial institution must provide the QCB with all the information and data related thereto.

QCB's prior approval shall be taken if an individual (natural Person or legal entity) is to own ten percent (10%) or more of a national bank's capital, whether be it direct or indirect ownership.

Switzerland Small Flag Switzerland

In addition to the members of the board of directors, the executive body, and any other persons who – due to their responsibilities within the bank – could jeopardise the bank's continued existence and proper business, the holders of Qualified Participations (see Question 15.) or persons exercising a Controlling Influence (see Question 15.) are subject to the fit and proper requirements in FINMA's practice.

The fit and proper requirement covers matters of professional qualifications (e.g. required for the proper management of a supervised entity) and personal reputation. The principal criterion used in assessing a person's suitability is their professional track record.

Turkey Small Flag Turkey

In addition to the information provided under Question 15, shares (i) representing directly or indirectly 10% or more of the bank’s share capital or voting rights or (ii) comprising the privilege of nominating member(s) to the board of directors correspond to the bank’s qualified shares (the “Qualified Shares”) and holders of the Qualified Shares (the “Qualified Shareholders”) shall satisfy the criteria required for the banks’ founders as set forth under Article 8 of the Banking Law. Accordingly, a Qualified Shareholder shall:

  • not have (i) gone bankrupt, (ii) declared concordat , (iii) an approval for the restructuring application through reconciliation or (iv) been granted with a decision of postponement of bankruptcy; in accordance with the Execution and Bankruptcy Law (Law No. 2004);
  • not hold any Qualified Shares or controlling shares in banks operation licenses of which have been revoked or which have been transferred to the SDIF;
  • not hold any Qualified Shares or controlling shares in (i) bankers and financial institutions subject to liquidation, (ii) development and investment banks operation licenses of which have been revoked; or (iii)credit institutions shareholding rights (other than dividends), management and audit of which have been transferred to the SDIF or permits and authorizations to conduct banking transactions and to accept deposits and participation funds have been revoked prior to occurrence of such events;
  • even if amnestied, and except for negligent offences; not have (i) been sentenced to (a) imprisonment for more than 5 years for any crime under the abolished Turkish Criminal Code (Law No. 765); or (b) imprisonment for more than 3 years pursuant to the Turkish Criminal Code (Law No. 5237 or (ii) committed any white collar crimes listed under Article 8 of the Banking Law;
  • have necessary financial strength and reputation;
  • possess honesty and competence required for job;
  • in case of a legal entity, have a transparent and clear shareholding structure together with its risk group.

Austria Small Flag Austria

For assessing the notification provided for in sec 20 para 1 BWG, in order to ensure the sound and prudent management of the credit institution of which an acquisition is proposed, and with regard to the likely influence of the proposed acquirer on the credit institution as well as the suitability of the proposed acquirer and the financial soundness of the proposed acquisition, further the reliability of the interested acquirer, the reliability, professional qualification and experience of any person who will direct the business of the credit institution and the financial soundness of the proposed acquirer will be taken into account.

Bulgaria Small Flag Bulgaria

An applicant who intends to acquire qualifying holding or participation reaching/exceeding the thresholds of 20, 33 or 50 per cent of the shares/voting rights in a bank licensed in Bulgaria has to comply with the following requirements:

  • To have high integrity and professional competence;
  • The reputation, knowledge, skills and experience of each individual intended to be elected as a board member and/or a high management position should comply with the statutory requirements;
  • The applicant should be able to finance the acquisition, has financial stability and can maintain it for not less than three years, including if needed, to provide financial support to the bank;
  • There should not be any obstacles to the banking supervision;
  • The documents and data do not raise reasonable doubts for money laundering and financing of terrorism.

BNB completes its assessment by taking into consideration the potential influence of the applicant over the bank, in view of guaranteeing the bank’s future stable and reasonable management.

Ecuador Small Flag Ecuador

Article 17 of the Resolution No. 271-2016 of the Monetary and Financial Policy and Regulation Board states that the shareholders/promotors of financial institutions must comply with the following requirements:

  • Justify economic solvency, which is defined as having a consolidated net worth not less than 1.5 times the contribution of capital that they undertake in the private financial entity;
  • Be legally capable;
  • Not being involved in the prohibitions established in articles 256 and 399 of the COMF. These are: i) owning, directly or indirectly, shares of companies outside the financial activity, ii) owning shares in (a) companies in other financial entities (b) entities with a corporate purpose related to national communication services, (c) legal entities of the popular and solidary sector; iii) entities with influence in other financial entity; iv) persons who have been charged with crimes of embezzlement, money laundering and financing of crimes such as terrorism.

Individuals or legal entities that acquire a shareholding equal to or greater than 6% of subscribed and paid-in capital, either directly or indirectly, as a constituent and / or beneficiary of trusts or any other legal form, in one of the entities of the financial sector private, will be evaluated by the Superintendence of Banks prior to their qualification regarding their suitability, responsibility and solvency, according to the aforementioned provisions. Said qualification shall be extended to the shareholders, when they acquire additional percentages in the subscribed and paid-in capital whenever their ownership is equal or exceeding 6%.

Ecuadorian laws do not impose requirements to major participations.

Ireland Small Flag Ireland

Further to the information set out under question 15, the rules regarding the acquisition of qualifying holdings have been standardised across the EU by way of Directive 2007/44/EC (Acquisition Directive) (transposed into Irish law by SI 206/2009) which standardises the timeframe within which the CBI must consider an application, the information that may be requested by the CBI as part of the approval pro-cess, the criteria the CBI must use for assessment and a requirement for regulators to work in consulta-tion with each other. The aim of the Acquisition Directive is to ensure that certainty, clarity, and predicta-bility are evident in all changes of control applications across the EU. The 2008 Guidelines for the prudential assessment of acquisitions and increases in holdings in the financial sector required by Directive 2007/44/EC apply. Assessment criteria are: reputation; reputation and experience of those who will direct the business; financial soundness; compliance with prudential requirements; and suspicion of money laundering or terrorist financing.

France Small Flag France

Owners of banking institution must comply with a long list of criteria which main ones are the following:

  • reputation of the proposed acquirer;
  • reputation of the persons who are expected to take charge of the effective running of the business of the institution or to be a member of the supervisory body;
  • reputation, experience and competence of key functions managers;
  • financial soundness of the proposed acquirer;
  • ability to still comply with prudential requirements;
  • risks of money laundering.

Belgium Small Flag Belgium

Yes, following Article 19 of the Banking Act, every natural person or legal entity who, acting alone or in concert, directly or indirectly, possesses a qualified or non-voting qualifying holding in the capital of the credit institution has to be deemed ‘fit and proper as to ensure a sound and prudent policy of the credit institution’. Whether or not these conditions are met, is subject to the criteria mentioned in the aforementioned Article 19 of the Banking Act.

Estonia Small Flag Estonia

A qualifying holding in a bank may be acquired, held and increased and control over a bank may be achieved, held and increased by any person conforming to the following requirements:

  1. who has an impeccable business reputation and is acting in the course of the acquisition according to the principles of sound and prudent management of a bank;
  2. after the holding has been acquired or increased, is electing, naming or assigning the director of the bank to be only such a person who conforms to the requirements specified in CIA;
  3. whose financial situation is adequately strong and sustainable to ensure the reliable and regular operation of the bank, and in the case of a legal person its annual reports, if such exist, are required to allow appropriate assessment of its financial situation;
  4. who is able to ensure that the bank is capable of following the prudential requirements specified in CIA, in case of a legal person primarily the requirement that the consolidation group a part of which the bank becomes has a structure that allows the exercise of adequate supervision, exchange of information and cooperation between financial supervision authorities;
  5. with respect to whom there is no justified suspicion that the acquisition, possession or increase of the holding or the control over the bank is connected to money laundering or terrorist financing or any attempts thereof or increases such risks.

Greece Small Flag Greece

Yes. Law 4261/2014 sets forth a series of qualitative requirements which should be met by holders of 'qualifying holdings' or holdings that are likely to lead to significant influence over a credit institution. In particular, in determining whether to provide clearance to a proposed acquisition (see Question 15 above), the BoG assesses the suitability of the prospective acquirer and the soundness of the transaction, on the basis of the following criteria:

  • the reputation of the proposed acquirer
  • the reputation and experience of the proposed new managers
  • the financial soundness of the proposed acquirer
  • the impact of such acquisition on the credit institution with particular regards to the ability of the credit institution to comply with its prudential supervision obligations and
  • any risk from potential ties of the proposed acquirer to money laundering or terrorist financing activities.

The BoG and/or the ECB may request from prospective acquirers to satisfy specific conditions or requirements, provided that the latter relate to either of the five (5) criteria enumerated above.

Germany Small Flag Germany

Yes. An acquirer of a qualifying holding needs to be approved by the ECB and needs to file the information mentioned in the Joint Guidelines for the Assessment of Mergers and Acquisitions published by CEBS, CEIOPS and CESR and Articles 22 and 23 of Directive 2013/36/EU. The general assessment criteria are: reputation of the proposed acquirer, reputation and experience of those who will direct the business, financial soundness of the proposed acquirer, compliance with prudential requirements, and any suspicion of money laundering and terrorist financing.

It should be noted that the voluntary industry deposit protection schemes also conduct ownership control proceedings that are similarly complex to the ones the regulatory authorities conduct.

United States Small Flag United States

As stated in response to Question 15, only shareholders that will have ‘control’ of a bank must be approved. When approving applications for shareholders to acquire ‘control’ of a bank, the appropriate bank regulatory agency or agencies will review certain factors, such as (i) competitive factors; (ii) financial condition of the person(s) or company seeking to acquire control of the bank; (iii) competence, experience and integrity of the acquiring person(s) or company; and (iv) other information necessary to determine if there is risk to depositors or the FDIC’s Deposit Insurance Fund if the person(s) or company obtains control of the bank.

Colombia Small Flag Colombia

The Organic Statute of the Financial System states that the Superintendence of Finance will not allow a person to participate as shareholder, member of the board of directors, legal representative, agent or in any other way in a financial institution if such person has:

  • Committed crimes against public economic assets, money- laundering or obtained money illegally.
  • Been declared under seizing of ownership, in the terms of Law 333 of 1996.
  • Been sanctioned for violating individual credit quotas regulation.
  • Been responsible for ill managing financial institutions in the past.

If a person who is already shareholder, member of the board of directors, legal representative, agent or participates in the bank in any other way at the moment in which any of the previous circumstances occurs, the person must relinquish his position in the financial institution. If such person is a shareholder, the shares must be sold in a period no longer than six (6) months.

Finland Small Flag Finland

The holder that reaches a qualified holding of 10%, 20%, 30% or 50% must disclose information on his/her reliability and financial situation. The acquisition can be rejected, for example, if the holding may endanger the sound and prudential business operations of the credit institution, or there are grounded suspicions in relation to the reputation or financial standing of the acquirer, the reliability or suitability of the management of the credit institution or its financial position or regulatory supervision may be jeopardized as a result of the acquisition. Restrictions also apply if the acquisition triggers concerns with respect to money laundering and terrorist financing.

United Kingdom Small Flag United Kingdom

When considering whether or not to grant approval, the PRA considers the suitability of the person, having regard to their likely influence over the bank. This will involve considering the following statutory items:

  • the reputation of the section 178 notice-giver;
  • the reputation and experience of any person who will direct the business of the UK authorised person as a result of the proposed acquisition;
  • the financial soundness of the section 178 notice-giver, in particular in relation to the type of business that the UK authorised person pursues or envisages pursuing;
  • whether the UK authorised person will be able to comply with its prudential requirements (including the threshold conditions in relation to all of the regulated activities for which it has or will have permission);
  • if the UK authorised person is to become part of a group as a result of the acquisition, whether that group has a structure which makes it possible to—
    1. exercise effective supervision;
    2. exchange information among regulators; and
    3. determine the allocation of responsibility among regulators; and
  • whether there are reasonable grounds to suspect that in connection with the proposed acquisition money laundering or terrorist financing is being or has been committed or attempted; or the risk of such activity could increase.

Updated: February 14, 2018