The proposed limitation of the group finance company (GFC) exemption has been revised and will be less radical. This is good news for GFCs. Under the revised exemption, companies may still be able to operate as a GFC without having to apply for a banking licence if certain conditions are met.

Proposal for limiting the group finance company exemption revised 

A proposal for limiting the group finance company exemption set out in Section 3:2 of the Financial Markets Supervision Act (GFC exemption) was publically consulted from 14 August 2013 to 15 September 2013. A number of law firms, including De Brauw, responded to the consultation. As a result, the proposed limitation of the GFC exemption has been revised. 

In the initial proposal, the GFC exception would no longer be available if 5% or more of the funds attracted from the public, or a corresponding amount, were on lent outside the group by the group finance company or by a group company. In the revised proposal, this limitation was deleted and the original exception was restored. Whether funds are on lent outside the group is in principle no longer relevant as long as the GFC extends more than 95% of its funds attracted from the public within the group. But an additional restriction has been added. The GFC exemption will not be available for a GFC of a group the activity of which is to "mainly" grant credit to non-group members for own account (i.e., a GFC of a 'banking group'). What should be understood by "mainly" is not defined. However, the explanatory notes with the revised proposal outline that this should be understood in the same way the Dutch Central Bank (DNB) interprets the term "mainly" in the definition of financial holding. DNB considers an entity to be a financial holding if, based on the consolidated balance sheet of the group, 80% or more of the entities within the group consist of financial institutions or credit institutions. Based on the reference to the definition of financial holding, we assume that the limit of 80% will also apply when determining "mainly" in relation to the GFC exemption. 

Furthermore, the restriction for a GFC belonging to a 'banking group' does not apply if the parent entity or the group entity to whom the GFC provides credit which are on lent outside the group is supervised by DNB or by a supervisory authority of another European Union member state. 

In summary, under the revised amendment, a GFC may still be able to operate as a GFC without having to apply for a banking licence if:

  • more than 95% of the funds attracted by the GFC from the public is on lent to group companies, and
  • one of the following conditions applies:
    (a)   the group to which the GFC belongs is not considered a group that "mainly" grants credit to non-group members for own account, or
    (b)   the parent entity or the group entity to whom the GFC provides credit which are on lent outside the group is supervised by DNB or a supervisory authority of another European Union Member State, and
  • other requirements which are not set out here, such as an irrevocable guarantee of the parent, are met.

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