Financial conglomerates "under scrutiny" - Joint control for groups operating in several financial sectors simultaneously
Large financial groups will now be under integrated supervision by the Bank of Albania and the Financial Supervisory Authority (AMF). The so-called financial conglomerates also exist in Albania, and include cases where banks, insurance companies, investment funds and other institutions providing financial services operate within a financial group.
The Ministry of Finance has just published for public consultation a draft law that aims to improve the overall financial security climate in the country and approximate our legislation with that of the European Union in this area.
Currently, the Albanian legal framework does not provide for consolidated supervision of financial conglomerates, as the Bank of Albania supervises banking institutions and other non-bank financial entities separately, while the Financial Supervisory Authority supervises the insurance market, the securities market and the funds market. Therefore, there is a lack of an integrated mechanism to supervise the entirety of a group when this group operates in several sectors simultaneously.
This draft law aims to prevent the "double use of capital", i.e. the situation when the same capital is simultaneously counted as regulatory capital in several entities of the group, as well as to limit excessive leverage within the group, which can be created when a parent company borrows to finance the capital of subsidiaries. Establishing an effective system of cooperation between the Bank of Albania (BoA) and the Financial Supervisory Authority (AMF), the two main sectoral regulators, for the integrated supervision of conglomerates.
The absence of such a law has so far created room for legal uncertainty and unmanaged risks in the financial sector. Its adoption will create a level playing field between Albanian financial groups and those of EU countries, enabling our entities to operate in accordance with the same prudential standards, as well as bringing our financial system closer to the European internal market.
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