4.3 Situations where an authorisation is required

Competent authorities should ensure that in the case of a merger of two or more credit institutions entailing the incorporation of a new entity to take up the merged banking activities, such a newly established entity should be subject to the prior granting of authorisation by the competent authority. Similarly, in those Member States where the authorisation is granted on an activity-by-activity basis, competent authorities should ensure that the extension of the business activities, as a result of a merger by absorption of another credit institution or of a purchase of activities from a third-party credit institution, should be subject to a prior extension of the authorisation if such new business activities are not already covered by the authorisation issued to the credit institution.

The execution of group restructuring transactions or the transfer of activities as a credit institution from one entity to another may require carving certain activities out of the transaction and entrusting them to a newly established temporary entity, before those activities are merged into the acquiring credit institution.¹⁴

¹⁴ For example, the sale of a credit institution that is part of a group, while certain activities that require authorisation as a credit institution of the divested entity need to remain within the group. The activities which should remain can, for instance, be carved out into a new temporary legal entity and subsequently merged with another group entity that is authorised as a credit institution.

Where competent authorities assess that, by virtue of the activities that are temporarily transferred, such an entity fulfils the definition of a credit institution, that entity should be subject to prior authorisation.

Without prejudice to the paragraph above, competent authorities should not subject the transfer of the credit institution’s activities to a temporary entity to the granting of prior authorisation where the following conditions are met:

• (a) the establishment of the temporary entity satisfies formal requirements of the structure for the execution of the transaction and the temporary credit institution’s expected lifetime corresponds to a ‘legal second’, i.e. an undefined short period of time during which the temporary entity holds the credit institution’s activities in order to formally complete a series of legal transactions that are required to merge the temporary entity with the acquirer, and
• (b) adequate and sufficient measures have been taken by the merging entities to address the execution risks of the transaction, including for the scenario that the transfer cannot be completed within the ‘legal second’. Such measures (for instance a transfer back of the activities) should aim to ensure that the temporary entity is prevented from being active on the market by carrying out activities that require authorisation as a credit institution.

Competent authorities should clarify that an authorisation to carry on the business of a credit institution granted to a specific entity should only be used by that entity and should not be transferred to another entity.

Considering that the authorisation is granted by competent authorities under the applicable national law, where a credit institution intends to transfer its seat to another Member State the competent authorities should subject that relocation to the prior granting of the authorisation by the competent authority of the Member State where the credit institution’s new registered office will be located.

Consistently with the applicable national company law, an existing credit institution may change its legal form. Where the change of legal form does not entail material supervisory changes, competent authorities should not make the change conditional upon the granting of a new or amended authorisation.