Qualifying holding
A qualifying holding is a direct or indirect holding in an undertaking that represents 10% or more of its share capital, guarantee capital, or voting rights, or that enables the exercise of a significant influence on the management of the undertaking concerned (e.g. through board membership). Indirect holding means that a party, other than a direct shareholder in a regulated entity, either exercises control over a direct holding (control criterion) or owns through the chain of ownership an indirect claim on 10% or more of the share capital or voting rights in a regulated entity (multiplication criterion) [1].
Those who intend to acquire alone or in collaboration with others, a qualifying holding in a financial undertaking, payment institution, electronic money institution, UCITS management company, alternative investment fund manager or an insurance company must notify the Central Bank of Iceland of the proposed transaction. The same applies to parties who intend, alone or in collaboration with others, to increase their holding so that the qualifying holding exceeds 20%, 30% or 50% or amounts to such a large holding that the regulated party will be considered as its subsidiary.
The Central Bank assesses whether the parties are qualified to hold a qualifying holding and various factors are examined:
- The reputation of the party that will hold the qualifying holding,
- their financial soundness
- experience and reputation of the new management,
- whether the ownership is likely to result in the party in the financial market no longer complying with prudential requirements and rules (e.g., capital requirements),
- whether the ownership can be expected to lead to money laundering or terrorist financing, or might increase the likelihood of conduct of this kind.
Parties holding a qualifying holding are not regulated parties in the same way as those who are engaged in licensed operations. Those who are authorised to hold a qualifying holding are, however, subject to various legal conditions, which the Central Bank monitors to ensure they are fulfilled, in addition to which the legislation imposes various obligations on the parties. Holders of a qualifying holding have a duty, for example, to notify in advance of any changes that may affect the assessment.
Legal provisions on qualifying holdings are based on a European Law. The Central Bank therefore takes into account Joint Guidelines published by European Supervisory Authorities (EBA, EIOPA and ESMA). The Central Bank requests the same information as other European competent authorities, in addition to requesting further information due to special Icelandic circumstances.
Qualifying holdings in credit institutions
Pursuant to Chapter VI of the Act no. 161/2002 on Financial Undertakings, the Central Bank processes notifications of qualifying holdings in credit institutions. As stated in the summary of the information that must accompany an application for an operating licence, notification of a qualifying holding must accompany the licence application, see overview of website's form page under “operating licence”. A notification of a qualifying holding will not be processed, however, until the operating licence for a credit institution has been granted. Deadlines do not begin to apply until the date on which a credit institution receives an operating licence.
Qualifying holding in insurance companies
Pursuant to Chapter X of the Act no. 100/2016 on Insurance Activities, the Central Bank processes notifications of qualifying holdings in insurance companies. As stated in the summary of the information that must accompany an application for an operating licence, notification of a qualifying holding must accompany the licence application, see overview of website's form page under “operating licence”. A notification of a qualifying holding will not be processed, however, until the operating licence for an insurance company has been granted. Deadlines do not begin to apply until the date on which an insurance company receives an operating licence.
More information about qualifying holdings
Further information about the Central Bank's assessment of qualifying owners, deadlines, the consequences of not sending in a notification or the acquisition of a holding by an ineligible party and ongoing evaluation can mainly be found in Chapter VI of Act no. 161/2002 on Financial Undertakings (credit institutions), Chapter I of Section 2 of Act no. 115/2021 on Market for Financial Instruments (investments firms), Chapter X of Act no. 100/2016 on Insurance Activities (insurance companies), Article 5 of Act no. 114/2021 on Payment Services (payment institutions), Article 14 of Act no. 17/2013 on the Issuance and Handling of Electronic Money (electronic money institutions), Article 13 of Act no. 116/2021 on UCITS (UCITS management companies) and Article 16 of Act no. 45/2020 on Alternative Investment Fund Management (managers of alternative investment funds).“
Information requirements for parties intending to acquire qualifying holdings can be found on the website's forms page under the "Qualifying holdings” heading.
Attention is drawn to the fact that an hourly fee is charged for the evaluation of the owner of the qualifying holding, cf. Tariff list of the Central Bank of Iceland no. 165/2023, for projects related to financial supervision.
[1] Example: Party B owns a direct, 100% qualifying holding in A.C holds a 51% stake in B, and D holds a 20% stake in C.D is therefore considered to hold a 10.2% indirect, qualifying holding in A (0.2 * 0.51 * 1 = 0.102). A more detailed explanation, with examples, can be found in Annex II of the Guidelines.