ECJ ruling simplifies intra-group reorganisations of regulated banks

When directly or indirectly acquiring 10% or more of the voting rights or capital of a credit institution, potential acquirers must notify the relevant financial regulator, triggering a qualifying holding procedure. 

It has long been a fixture of EU financial regulatory law that supervisory practice interprets “acquiring" broadly. Thus, the European Central Bank and national supervisors generally also require a qualifying holding procedure if there is a change in the legal holding structure of a credit institution, including transforming an indirect holding into a direct holding. This is the case even if the change does not affect the quantum of voting rights or capital ultimately held in the credit institution. 

While some national regimes, including Germany, make certain procedural concessions in case of mere changes in the legal holding structure, it has nevertheless been necessary to notify the regulator and undergo the qualifying holding process before acquiring the indirect holding. This process can make an intragroup reorganizations very burdensome, sometimes requiring extensive filings even when there is no change in holdings of the ultimate owner or owners and when the relevant owners' integrity had already been confirmed.

Not anymore, the European Court of Justice says in a judgment issued last month. 

In Fininvest v ECB and Others (C-512-22 P), the ECJ holds that “it is not the legal structure of a holding – in particular, whether it is direct or indirect – which determines the existence of a qualifying holding, but (…), whether that holding makes it possible to attain a particular level of control or influence over the credit institution”. As a consequence, the Court says, altering the legal structure of a qualifying holding cannot regarded as an acquisition of such a holding if the quantum of that holding had not been altered. 

It remains to be seen how national regulators and the ECB reflect the ECJ's judgment in their supervisory practice. From their practice, the authors are aware that some regulators have already taken note of the Court's judgment and, therefore, no longer require qualifying holding procedures in case of intra-group mergers.