to determine that corporate affiliations or structures do not expose the bank to undue risks or hinder effective supervision...

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Essential criteria
Essential criteria


1. Laws or regulations clearly define what types 1. Laws or regulations clearly define: and amounts (absolute and/or in relation to a (a) what types and amounts (absolute and/or in bank’s capital) of acquisitions and investments
relation to a bank’s capital) of acquisitions
need prior supervisory approval.
and investments need prior supervisory

approval; and
5. Laws or regulations clearly define for which (b)
cases for which notification after the
cases notification after the acquisition or
acquisition or investment is sufficient. Such
investment is sufficient. Such cases should
cases are primarily activities closely related to
primarily refer to activities closely related to
banking and where the investment is small
banking and the investment being small relative
relative to the bank’s capital.
to the bank’s capital.


2. Laws or regulations provide criteria by which to 2. Laws or regulations provide criteria by which to judge individual proposals.
judge individual proposals.


3. Consistent with the licensing requirements, 3. Consistent with the licensing requirements, among the objective criteria that the supervisor among the objective criteria that the supervisor uses is that any new acquisitions and uses is that any new acquisitions and
investments do not expose the bank to undue investments do not expose the bank to undue risks or hinder effective supervision. The risks or hinder effective supervision. The supervisor can prohibit banks from making major supervisor also determines, where appropriate, acquisitions/investments (including the
that these new acquisitions and investments will
establishment of foreign branches or subsidiaries) not hinder effective implementation of corrective in countries with secrecy laws or other regulations measures in the future32. The supervisor can prohibiting information flows deemed necessary prohibit banks from making major for adequate consolidated supervision.
acquisitions/investments (including the

establishment of cross-border banking
AC1. When a bank wishes to acquire a significant operations) in countries with laws or regulations holding in a financial institution in another prohibiting information flows deemed necessary country, the supervisor should take into for adequate consolidated supervision. The consideration the quality of supervision in that supervisor takes into consideration the country and its own ability to exercise supervision effectiveness of supervision in the host country on a consolidated basis.
and its own ability to exercise supervision on a

consolidated basis.

32. In the case of major acquisitions, this determination may
take into account whether the acquisition or investment
creates obstacles to the orderly resolution of the bank.

4. The supervisor determines that the bank has, 4. The supervisor determines that the bank has, from the outset, adequate financial and from the outset, adequate financial, managerial organisational resources to handle the and organisational resources to handle the acquisition/investment.
acquisition/investment.





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2006 Methodology
2011 Draft Methodology
6. The supervisor is aware of the risks that non-
5. The supervisor is aware of the risks that non-
banking activities can pose to a banking group banking activities can pose to a banking group and has the means to take action to mitigate and has the means to take action to mitigate those risks.
those risks. The supervisor considers the ability

of the bank to manage these risks prior to
permitting investment in non-banking activities.

No text.
Additional criterion

1. The supervisor reviews major acquisitions or
investments by other entities in the banking group
to determine that these do not expose the bank to
any undue risks or hinder effective supervision.
The supervisor also determines, where
appropriate, that these new acquisitions and
investments will not hinder effective
implementation of corrective measures in the
future.33 Where necessary, the supervisor is able
to effectively address the risks to the bank arising
from such acquisitions or investments.

33. Please refer to footnote 32 under Principle 7, Essential
Criterion 3.

Principle 19: Supervisory approach
Principle 8: Supervisory approach