Commission Communication – INTRA-EU Investment in the financial services sector

The purpose of this communication is to remind Member States of the relevant basic Treaty freedoms in the area of cross-border investment in financial institutions and the requirement for strict proportionality in any restrictions to these freedoms which might be necessary to protect imperative requirements in the general interest, since financial sector consolidation is lagging behind, suggesting obstacles to investment.

According to this communication, the provisions in the Treaty for total freedom of capital movements cover all forms of intra-EU cross border investment. The acquisition of controlling stakes in a domestic company by an EU investor from another Member State is both a form of capital movement and covered by the right to establishment.

Restrictions on the freedoms are either expressly mentioned in the Treaty establishing European Community or admitted by the European Court of Justice on the basis of the Treaty establishing European Community, both on prudential grounds. Core principles of prudential supervisions have been set forth by directives that also ensure a certain degree of harmonization. All restrictions must be non-discriminatory, must be suitable and proportionate, must prove legal certainty and follow transparent procedures, as construed by the European Court of Justice.

Within the area of cross-border consolidation, authorisation procedures should be clearer and more transparent. The obstacles to financial consolidation should be reviewed more broadly.

The Commission highlights that it will challenge any breach of the EU Freedoms identified with respect to direct investment by EU financial institutions. It also notes that it has been investigating competition in the retail financial markets.