What reporting and/or approval requirements apply to the acquisition of shareholdings in, or control of, banks?
Banking & Finance
Permit requirement for acquisition of shareholdings or control
The Banking Law imposes certain restrictions on holdings in banks (and bank holding corporations) beyond certain thresholds. Holding of any type of shares (or any other means of control such as the right to nominate directors) above 5% requires a permit from the Governor of the BoI (in advance). In addition, a person cannot coordinate its voting for the nomination of a director in a bank with another person without a permit. The Banking Law also sets out that no person shall control a bank unless it obtains a permit from the Governor of the BoI.
Reporting Requirements on Holdings in a Banking Corporation
A shareholder holding more than 5% of the shares (or any type of the means of control) in a bank has to report its holdings to the bank. Such report shall include, among other things, the person for whom such holder acts as agent or trustee, and in case the holder is a corporation – its controlling shareholders and anyone holding more than 5% in such corporation. The report shall be delivered annually (on April 1) and on any other dates determined by the BoI. In case of a bank without a controlling stake (i.e. no shareholder in the bank needs a permit for control from the BoI) the reporting threshold is 1% (instead of 5%) and the report is required each time this threshold is crossed.
In case the bank is also a public company (its shares were offered to the public), additional reporting obligations to the bank apply pursuant to the Israeli securities law and regulations.
The HNB’s approval is necessary to acquire qualifying direct or indirect holding (10%) in a credit institution or to increase a holding in a credit institution reaching 20%, 33% or 50% stake. Similar to obtaining of the operating license, the application may be initiated by submitting the filled out online application form that is available on the website of the HNB together with various attachments including the following: (i) contractual offer made with respect to the qualifying holding; (ii) evidence concerning the legitimacy of the financial means for acquiring qualifying holding; (iii) zero certificates on no outstanding debts owed to the tax authority, customs authority, health insurance administration agency or pension insurance administration agency of competence under the applicant’s national law; (iv) various statements regarding no criminal records regarding executives, and conditions on prudent operation; (v) a statement declaring any and all contingent liabilities and commitments, by definition of the Hungarian act on accounting; (vi) founding documents, ownership structure; (vii) in case of a foreign financial institution, insurance company or investment firm a statement or certificate from the competent supervisory authority of the country of establishment stating that the enterprise conducts its activities in compliance with prudential regulations shall also be attached to the application for authorization.
A participation in a bank can be described as a “qualifying holding” when it represents 10% or more of the shares and/or voting rights in the bank or crosses the other relevant thresholds (20%, 30% or 50%). In addition, obtaining rights to appoint the (majority of) the management board or other means of providing significant influence over the management of the bank also falls within the scope of a “qualifying holding”.
Pursuant to Article 4(1)c) of the Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions (SSM Regulation), as the European banking supervisor, the ECB is exclusively competent to assess notifications of the acquisition and disposal of qualifying holdings in banks.
The undertaking intending to acquire or increase a qualifying shareholding of 20%, 30% or 50% shareholding in a bank, or other shareholding granting the control over the bank, must obtain the prior consent of the Bank of Lithuania.
The consent may be refused by the Bank of Lithuania if the applicant does not meet the requirements for eligible owners, as briefly described in section 15 of this questionnaire.
1) Notification about the intention to acquire
The Polish FSA must be notified in writing about any intention to acquire (directly or indirectly) shares in a Polish bank if following such acquisition the following shareholding thresholds will be exceeded 10%, 20%, 33.3% or 50% or if dominant position will be achieved.
The Polish FSA may object to such acquisition.
2) Notification following acquisition
An entity which has acquired shares in a Polish bank must notify such bank if as a result of such acquisition the following shareholding thresholds have been be exceeded: 5%, 10%, 20%, 25%, 33.3%, 50%, 66% or 75% or if dominant position has been achieved. The Polish bank will subsequently notify the Polish FSA about such acquisition.
Any potential purchaser or any significant shareholder which considers to increase or decrease its participation must first notify in writing the NBR and submit at the same time certain statutory documents and information.
If the potential purchaser will obtain the control of the target bank based on the acquisition, it shall submit with NBR, inter alia: (i) a business plan which shall reflect its strategy concerning the bank’s activity and structure; (ii) the proposed structure of the group from which the bank will belong; and (iii) the financial evaluation of the consequences of the proposed acquisition including a financial projection for a medium term.
In case the potential purchaser will not detain the control of the target bank, but will acquire a qualifying holding (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 that undertaking) subject to the notification, it must submit with the NBR a strategy document with the required information.
The NBR may oppose to the proposed acquisition, notified as per above, if there are reasonable grounds to consider that the requirements for ensuring a prudent management of the bank by the potential purchaser are not met.
Every entity contemplating acquisition of major shareholding in a bank must make an application to the RBI along with RBI prescribed declarations. The RBI will then seek recommendations from the board of directors of the concerned bank.
Generally, any acquisition of 5 per cent or more of the shareholding/ voting rights of a bank is subject to prior approval of the RBI. On obtaining such approval, the stake can subsequently be increased to 10 per cent (without obtaining an additional approval). While the general rule is that 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 limit can be extended up to 26 per cent by the RBI. The RBI also assesses whether the shareholder is ‘fit and proper’ to be a major shareholder and these vary depending on the percentage of stake acquired.
In relation to the acquisition of 5 per cent or more of shares or the voting rights of the bank, the RBI will evaluate, among other things:
- the applicant’s integrity, reputation and track record in financial matters (including any financial misconduct);
- the applicant’s source of making such acquisition;
- the applicant’s compliance with tax laws; and
- the entity’s financial strength and consistency with standards of good corporate governance, in cases where such an applicant is a body corporate.
Additional factors are considered for acquisition in excess of 10 per cent of shares of the bank.
There are additional caps imposed on the holding depending on the type of bank. For instance, for private sector banks the BR Act and the RBI impose shareholding limits on certain types of shareholders:
- Promoters or promoter group: 15%
- Natural persons (individuals): 10%
- Legal persons:
- non-financial institutions: 10%
- non-regulated or non-diversified and non-listed financial institutions: 15%; and
- regulated, well diversified, listed, supranational and/or public sector financial institutions or the government: 40%.
The RBI is able to permit an entity to acquire shares in a domestic private bank in excess of the above limits. In some cases, such as new banks set up under a holding company, promoters have been provided a time limit in which they must dilute or divest their shareholding to meet the above limits.
In relation to FDI filings, the inward remittance for subscription to shares must be reported to the authorised dealer by the issuing company within 30 days of the receipt of remittance in the Advance Reporting Form along with the Foreign Inward Remittance Certificate. Upon the issuance of shares, the same must be reported by the issuing company within 30 days of issuance as per the form FC-GPR. Sale of such securities held by a non-resident to an Indian resident must be reported by the Indian resident as per the form FC-TRS within 60 days of the receipt of remittance.
A reporting requirement applies to the holding of more than 5% of the voting rights in a bank. The report must be submitted to the FSA within five days of acquiring those voting rights.
Furthermore, authorisation by the FSA is required to hold at least 20% (or 15%) of the voting rights in a bank. The 15% threshold only applies where the holder may have the capability to influence the bank (e.g., delegation of a representative director or other director, or any equivalent position; provision of significant financing or technology; or having significant sales and purchases or any other operational or business transactions).
Any person who acquires, directly or indirectly, at least 5% but less than 10% of the share capital or of the voting rights in a credit institution must inform the MFSA in writing, indicating the size of the shareholding.
Further, all shareholders meeting the definition of a ‘qualifying shareholder’ must be approved by the MFSA prior to effectively becoming a shareholder of a credit institution. For this purpose, a ‘qualifying shareholding’ is defined by the Banking Act as a direct or indirect holding in an undertaking which represents 10% or more of the share capital or of the voting rights, or which makes it possible to exercise a significant influence over the management of the credit institution in which that holding subsists. Qualifying shareholders who are individuals must submit a Personal Questionnaire to the MFSA, together with a recent police conduct certificate as well as a certified copy of passport and recent utility bill confirming the residential address. Qualifying shareholders other than individual are required to submit a Corporate Questionnaire, accompanied by the last three year audited financial statements as well as copies of applicable constitutional documents.
In assessing the application for approval as qualifying shareholder, the MFSA aims to ensure the sound and prudent management of the credit institution in which an acquisition is proposed, and have regard to the likely influence of the proposed acquirer on the credit institution. For this purpose, it shall appraise the suitability of the proposed acquirer and the financial soundness of the proposed acquisition.
Further increases, directly or indirectly, to such qualifying shareholding in a credit institution as a result of which the proportion of the voting rights or of the capital held would reach or exceed 20%, 30% or 50%, would also require MFSA prior approval.
Any disposals of qualifying shareholdings must be notified to the MFSA in accordance with the applicable thresholds.
Paragraph 3 of the CBN Code of Corporate Governance for Banks and Discount Houses in Nigeria (Code) provides that the acquisition of a shareholding of 5% and above by any investor in a bank shall be subject to the CBN's prior approval. Where shares are acquired through the capital market, the bank shall apply for a no objection letter from the CBN immediately after the acquisition. Thus, no single shareholder can acquire more than 5% in the share capital of any bank without the CBN’s prior approval.
The notification and approval of the Securities and Exchange Commission (SEC) is required for the acquisition of controlling interest in the shareholding in banks. Also, with a view to discourage government from having majority shareholding in banks, the Code provides that the government's equity holding in any bank is limited to 10%.
Acquisition or of Qualified Holdings in Norwegian banks requires preapproval from the NFSA, or by the MoF in matters of importance and/or of a fundamental nature. The acquisition cannot be completed before approval is obtained. "Qualified Holding" is defined as an ownership stake representing 10 percent or more of the capital or votes of the bank or which otherwise gives rise to a significant influence over the bank's management and its business. The same applies to acquisitions that will result in a Qualifying Holding being increased to or exceed 20, 30 or 50 per cent of the capital or votes of the bank.
The application for acquisition must meet certain specific requirements. The case handling period is maximum 60 days, unless the authorities' requests for further information before the 50 working days have elapsed, in which case the deadline will be suspended until the response from the acquirer has been received but not for more than 20 working days if the acquirer is supervised or resident in an EEA State.
A person's total ownership interest is calculated on the basis of directly and indirectly held ownership interests as well as ownership interests which the person concerned has the right to acquire on his own initiative, voting rights and ownership rights held by group companies and persons acting in concert with the person concerned.
Anyone who wishes to dispose of a Qualifying Holding, or reduce it so that the ownership share becomes less than one of the above limits mentioned in the first paragraph, shall notify the NFSA of its intention to dispose those shares.
Any individual or legal entity who intends to own, directly or indirectly, a qualifying holding in a credit institution shall inform, in advance, Banco de Portugal of such intention.
Banco de Portugal shall be provided with several information, such as the identity of the proposed acquirer, and information related to the nature of the acquisition, including the acquisition's financing method.
Disposal of qualifying participations are also subject to a duty to communication.
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.
QCB's special prior non-objection should be taken, if any financial institution will own fifty percent (50%) or more of a national Bank (direct or indirect Ownership), taking into account when evaluating the application, the instructions on consolidated supervision.
Natural persons or legal entities that directly or indirectly participate in a Swiss bank with at least 10% of the bank's capital or voting rights (a Qualified Participation) or otherwise may influence the bank in a significant manner (Controlling Influence) are subject to prior notification requirements and a related proper business conduct review. Although the Banking Act calls the above notice requirements a notification duty, it is a de facto approval requirement. Further notification duties exist whenever participation is increased or decreased so that it reaches, exceeds or falls below the thresholds of 20%, 33% or 50% of the bank's capital or voting rights. In addition, a bank itself also must notify FINMA where it has knowledge that any person is a qualified participant or reaches, falls below or exceeds the thresholds of 10%, 20%, 33% or 50% of the capital or voting rights or otherwise exercises a controlling influence on the bank.
Acquisition of a bank’s shares that result in the direct or indirect holding of the shares representing 10% or more of the respective bank’s capital is subject to the permission of the BRSB. Additionally, if the shares directly or indirectly held by a single shareholder exceed 10%, 20%, 33% or 50% of the capital as a result of an acquisition, or the shares directly or indirectly held by a single shareholder falls below the abovementioned percentages as a result of a share transfer, BRSB’s prior permission is required.
In addition, transfer of a bank’s preferential shares comprising the privilege of nominating member(s) to the board of directors is also subject to the BRSB's permission irrespective of the percentage of the share acquisition/transfer.
Note that as a condition to obtaining BRSB’s permission, the acquirer of the respective shares shall deposit a transfer fee equal to 1% of the nominal value of the shares to be acquired, with the SDIF.
With respect to the acquisition of shares (whether preferential or ordinary) of publicly held banks through the stock exchange, pursuant to the Permission Regulation, BRSB’s permission shall be obtained in order for the acquirer to use the shareholder rights (other than the right to dividend) vested in the acquired shares. Additionally, in the event that the parent of a publicly held entity, holding the shares representing 10% or more of the capital of a bank, changes due to a share acquisition through the stock exchange, such legal entity shall obtain the permission of the BRSB in order to use the shareholder rights (other than the right to dividend) vested in the shares of the relevant bank held by such entity.
Any party who has taken a decision to acquire or dispose of (directly or indirectly) a participation of 10%, or to increase or decrease qualified participation by reaching a 20%, 30% or 50% threshold of voting rights or capital in an Austrian credit institution (or in such a way that the credit institution becomes a subsidiary undertaking of that party), must inform the FMA in advance. The FMA shall have a maximum of 60 working days as from the receipt of the notification and all the documents required in sec 20b para 3 BWG to prohibit the proposed acquisition in writing following an assessment according to the assessment criteria set forth in sec 20b BWG, provided there are reasonable grounds therefore or the information submitted by the proposed acquirer is incomplete.
Any person, as well as persons acting in concert, need the prior approval of BNB, in order to acquire shares/voting rights in a bank licensed in Bulgaria, if as a result of such acquisition its/their participation becomes qualifying (i.e. direct or indirect holding in an undertaking representing 10 per cent or more of the capital/voting rights or which makes it possible to exercise significant influence over the bank’s management) or if this participation reaches or exceeds the thresholds of 20, 33 or 50 per cent of the shares/voting rights. The rule is also applicable to share acquisition on the stock exchange/another regulated market of securities or as a result of capital increase.
Preliminary BNB approval is also required in case a bank becomes a subsidiary.
In case that the above thresholds are reached as a result of objective circumstances, voting rights may not be exercised and are not calculated for quorum purposes before receiving BNB approval.
Any transactions, resolutions and actions, which are performed in breach of the above requirement for prior approval of BNB, are void.
The Monetary and Financial Code states that the Superintendence of Banks is entitled to authorize the assignment of assets, liabilities and the rights contained in the agreements of the financial entities that are under its control.
The Superintendence of Banks will qualify the solvency and suitability of the assignee in the following cases:
- If the assignment of shares is equal or higher of the 6% of the share capital;
- If the assignment of shares is performed to several assignees, and that based in the criteria of the Superintendence, they have any business, corporate or family relations, that considered individually will not be higher than the 6%, but together they achieve this threshold.
There are restrictions for local financial entities, private and public, to become shareholders of a foreign financial entity. The requirements for requesting the approval of the Superintendence of Banks are: the consent of the local authority of the country in which the foreign financial entity operates; an affidavit of the legal representative stating that the stock acquisition is nor for tax evasion or flight of capital purposes; to submit the current legislation of the country of operation of the foreign financial entity, as well as any other information that allows to evaluate the monitoring and control capacities; the express consent to allow to the Superintendence of Bank to perform audits and for request additional information that considers necessary, without any limitation (Art. 184, COMF).
Chapter 2 of Part 3 of CRRI sets out the requirements in relation to the acquisition and disposal of quali-fying holdings in credit institutions.
A qualifying holding is defined in Article 4(1) of CRR as ‘ …a direct or indirect holding in an undertaking which represents 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 that undertaking...’.
(a) CRRI sets out reporting and approval requirements regarding qualifying holdings as follows:
- an applicant for a banking licence is required to provide details of all qualifying hold-ings. Full details, including whether there are any holding companies involved in the ownership structure and the rationale for such a structure, must be provided as part of the application;
- a credit institution admitted to trading on a regulated market is required to report qualify-ing holdings to the CBI at least once a year. Currently Allied Irish Banks plc (AIB) and The Governor and Company of the Bank of Ireland (BOI) are the only domestic credit institutions listed on stock exchanges.
- any person who proposes to acquire a qualifying holding in a credit institution must noti-fy the CBI in advance of the proposed acquisition and must supply such information as the CBI may require. The CBI will assess a proposed acquisition to ensure the sound and prudent management of the credit institution concerned. A proposed acquirer can only complete an acquisition if the CBI advises of no opposition to the acquisition or if the assessment period (60 business days from the date of CBI’s written acknowledge-ment of receipt of the acquiring transaction notification form) lapses without notification of opposition from the CBI;
- where a qualifying holding is increased without prior CBI approval, the CBI may make an application to the High Court of Ireland to have the increase upheld if the court is satis-fied that the failure to notify the CBI was inadvertent or that it is in the interests of justice to make such an order;
- where an existing qualifying holding is proposed to be increased above or decreased below thresholds of 20%, 33% or 50%, a notification to the CBI is required;
- if a credit institution becomes aware of an increase or decrease in a qualifying holding above or below the thresholds noted in (e) above, the credit institution is obliged to in-form the CBI of the movement without delay.
(b) As stock exchange listed entities AIB and BOI are further subject to the transparency require-ments of Directive 2004/109/EC (Transparency Directive) (transposed into Irish law by the Trans-parency (Directive 2004/109/EC) Regulations 2007 of Ireland (as amended) (SI 277/2007) (Trans-parency Regulations) and the CBI’s rules and regulations regarding issuers of securities on a regulated market (MiFID) (CBI Transparency Rules). The CBI Transparency Rules require that noti-fication be given to an issuer where a person's percentage of voting rights (direct or indirect or an unconditional right to call for shares that create voting rights) in that issuer reaches, exceeds or falls below:
- 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% and each 1% threshold thereafter up to 100% or, in the case of a non-Irish issuer, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75 as a result of an acquisition or disposal of shares or Regulation 17 financial instruments; and
- an applicable threshold due to events changing the breakdown of voting rights, and on the basis of information disclosed by the issuer.
Where an issuer is incorporated in an EEA state other than Ireland, a notification must be made based on equivalent events.
Changes of shareholding must be subject to prior authorisation of the ACPR in the following cases:
- Acquisition of the effective management control of the institution,
- Acquisition of one tenth, one fifth or one third of the capital and/or of the voting rights.
All modifications to the licence file shall be approved or declared to the ACPR.
Supervisory approval may be required when certain thresholds are reached (10%, 20%, 30% or 50%). In any event, the aspiring new shareholder has to notify the relevant supervisory authority (see question 1) after which the supervisory authority will publish a list of ‘required information’ (on its web application). Based on the provided information, the supervisory authority will then decide on the approval.
In addition, a notification requirement applies when a threshold of 5% is reached (which is not included in the CRD IV package).
A person who intends to acquire a qualifying holding in a bank directly or indirectly or to increase a holding so that the proportion of the share capital or votes in the bank held by the person exceeds 20, 30 or 50 per cent or so that the bank would become a company controlled by the person as a result of the transaction is required to inform the FSA of such intention beforehand.
If a person intends to transfer shares in an amount which would result in the person losing a qualifying holding in a bank or if the person reduces the holding thereof such that it falls below 20, 30 or 50 per cent or foregoes control over the bank, the person is required to promptly inform the FSA of such intention and indicate the number of shares which the person owns and transfers and holds after the transaction.
Reporting and approval requirements apply in the case of the so-called 'qualifying holdings.' In particular, a direct and/or indirect acquisition of shares and/or voting rights in a credit institution, so that the participation of the prospective acquirer(s) reaches or exceeds the thresholds of 20%, 1/3 and 50% triggers an obligation to prospective acquirers, whether individuals or legal entities, to notify such transactions to the BoG for clearance.
In addition, although not strictly constituting a 'qualifying holding,' any direct and/or indirect acquisition of shares and/or voting rights in a credit institution, so that the participation of the prospective acquirer(s) reaches or exceeds the threshold of 5% must be likewise be notified to the BoG for approval. In such case, the latter will assess whether such acquisition is likely to lead to significant influence over the credit institution in question.
Forming the intention to acquire or dispose of a qualifying holding (bedeutende Beteiligung), or to increase an already existing holding, in a credit institution triggers a notification duty. The respective thresholds are 10%, 20%, 30% and 50%.
There are no reporting or approval requirements that apply to the acquisition of shareholdings in banks, unless such a shareholding constitutes ‘control.’ If a company seeks to acquire ‘control’ of a bank, it must be approved by the FRB under the BHC Act. If an individual (or group of persons acting together in concert) seeks to acquire ‘control’ of a bank without the use of an intervening corporate entity, it must be approved by the principal regulator(s) of the bank under the Change in Bank Control Act or similar state laws.
With some variation among laws, ‘control’ of a bank generally means ownership, control or power to vote (whether individually, or as a part of group) 25% or more of the outstanding shares of any class of the bank’s voting securities or the power, directly or indirectly, to direct the management or policies of the bank, although in some cases a “control” may be deemed to arise through a small shareholding.
In accordance with the Organic Statute of the Financial System, if a person intends to purchase more than 10% of the shares of a financial institution, previous and express authorization from the Superintendence of Finance is necessary. The Superintendence will evaluate the suitability and responsibility of the person intended to purchase the shares. Under this context, suitability refers to the need for the person buying the shares to have more than at least 1.3 times the capital the person is intending to invest. If such person fails to obtain the approval, the acquisition of the shares is ineffective.
Also, if any financial institution intends to acquire shares in another financial institution such as banks, the Superintendence of Finance must be duly notified and in a period of two (2) months, it must approve or oppose to the operation.
An acquisition of shares, participations or units, either directly or indirectly, in a credit institution resulting in a qualifying holding (i.e. at least 10% of its share or co-operative capital, investment share capital or basic fund, or which produces at least 10% of the voting rights carried by its shares or participations, or which holding otherwise entitles to exercise similar significant influence in the management of a credit institution) is subject to prior notification to the FFSA or the ECB as applicable under the SSM Regulation.
A similar notification obligation applies in cases where the holding in a credit institution is increased so that the proportion of the share capital, co-operative capital, investment share capital, basic fund or voting rights held reaches any of the thresholds of 20%, 30% or 50% of the same, or results in the credit institution becoming or ceasing to be a subsidiary of the acquirer. The same reporting requirement is triggered if the shareholding falls below any of the aforementioned thresholds. The contents of the notification are further regulated by government decree.
A credit institution or its financial holding company must notify the FFSA of the names of owners of holdings referred to above as well as of the sizes of such holdings at least once a year, and immediately communicate any changes in the ownership of such holdings that have come to its notice. If the shares of the credit institution are traded on a regulated market, the above information must also be disclosed to the European Securities and Markets Authority (ESMA).
The FFSA must render its decision or forward it to the ECB for approval within 60 days from having confirmed receipt of the notification. The FFSA or the ECB, as applicable, can object to the acquisition of the holding if the holding would endanger the business operations of the credit institution being carried out in accordance with prudent and sound business principles or if the acquirer fails to provide the regulators with any required information on the acquisition.
The UK regime relating to changes in control is ultimately derived from CRD IV. A change of control of a UK bank is subject to a notification and clearance regime.
Under section 178 of the Financial Services and Markets Act (FSMA), to acquire or increase control over a UK-authorised bank, a person must notify the PRA writing before making the acquisition and must await either positive consent from the PRA (or the expiry of the 60 day statutory assessment period) before making the acquisition. Control for these purposes looks at both shareholding and voting power. It is a criminal offence under section 191F of the Financial Services and Markets Act (FSMA) to acquire or increase control without notifying the PRA and receiving approval first.