EU takes step to ease proposed curbs on foreign banks, document shows

By Huw Jones

LONDON – International financial institution branches within the European Union wouldn't mechanically turn out to be a costlier subsidiary if their enterprise reached a sure “systemic” dimension, the Czech EU presidency proposed on Thursday.

The EU’s government European Fee shocked overseas banks final October when it proposed tightening oversight of how overseas banks can serve clients within the 27-member bloc.

The transfer follows Britain’s exit from the EU, which has left a competing main world banking centre on its doorstep.

“With a view to maintain the consensus reached on the June compromise textual content, the Presidency doesn't suggest an automated subsidiarisation-requirement if the entire property of a TCB (third nation department) exceed a sure threshold,” the presidency mentioned in a doc dated Oct. 6 and seen by Reuters.

The presidency additionally mentioned a proposal to drive third nation branches to position “liquid property” in a particular account also needs to be deleted.

There also needs to be extra standards for assessing if a overseas financial institution department is “systemic”, that means it ought to turn out to be a subsidiary, it added.

Changing a department right into a subsidiary includes tying up extra capital regionally, and dealing with a lot nearer scrutiny by EU regulators, such because the European Central Financial institution, as branches are largely regulated by a financial institution’s house watchdog.

The Czech presidency leads discussions on behalf of EU states, which together with the European Parliament have remaining say on the fee’s proposals.

Negotiations are anticipated to enter 2023.

The fee additionally proposed potential curbs on overseas banks beneath what's known as Article 21c.

Banks outdoors the EU supply wholesale capital market providers to corporations contained in the bloc, corresponding to advising on bond issuance, and feared that Article 21c would restrict this capability, forcing them to open a department and even subsidiary within the bloc.

“With a view to attain a usually acceptable compromise, the Presidency proposes to stay to the June compromise textual content as regards the deletion of Article 21c,” the doc mentioned.