Regulation of finance companies

Regulation of finance companies

Regulation of finance companies

08.07.2014 NL law

The draft Financial Markets Amendment Act 2015 was submitted to Parliament on 10 April 2014. The Act covers various matters which are primarily relevant for financial institutions. One proposed change relates to the regulation of finance companies, which is also relevant for non-financial groups. 

Many large companies typically use internal finance companies to act as their in-house bank. They attract funding in the market, and lend the proceeds to their group companies. Finance companies are exempt from the requirement to obtain a banking licence only if they attract funding from professional market parties. An exemption is also available if they attract funding from the public, provided that (i) the funding is obtained through the issuance of transferable debt securities, (ii) the obligations of the finance company are guaranteed by the parent or a keep-well agreement was issued by the parent, and (iii) at least 95% of the proceeds are lent to group companies.

The draft Financial Markets Amendment Act 2015 contains a number of clarifications with respect to these three conditions. In particular, relating to the 95%-requirement and the requirement to have a parent guarantee or a keep-well agreement in place. In addition, according to the draft Act, the exemption will no longer apply if the main business of the group is providing financing to third parties.


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