Brussels restricts banks from using “cross-border” permits to enter the EU

Brussels plans to crack down on complicated national arrangements that allow banks outside the EU to sell services to the EU, and it will hit London banks that rely on these arrangements to cushion the impact of Brexit.

The proposal will prevent almost all non-EU countries from cross-border sales to the EU single market. Banks are keen to enter the European Union across borders, because some trade from its main international centers is cheaper and easier than transferring funds and employees.

Cross-border suppression is part of an attempt to simplify the way global banks operate in the European Union. Brussels also hopes to give more powers to regulators to enable banks to turn some branches into more strictly regulated subsidiaries.

It is part of the European Commission’s Capital Requirements Directive, which will provide a legal basis for the latest global bank capital standards and end the differences allowed by regulatory agencies in different countries. It must still be approved by the European Parliament and the Council.

As banks continue to provide services to EU customers from London, ECB officials have recently worried about a sharp increase in the use of national arrangements and exemptions to conduct cross-border business after Brexit. For a long time, banks headquartered in the United States, Switzerland, and Asia have used cross-border licenses for certain activities in the European Union.

Edouard Fernandez-Bollo, a board member of the European Central Bank’s supervisory body, warned in September that banks should not use the cross-border system “as a means of carrying out a large number of activities in the EU in a business-as-usual environment”.

“The direction of development since Brexit is clearly that European authorities want to participate more in the supervision, financial services, and banking activities within the EU,” said Peter Bevan, a lawyer at Lida Law Firm. “Obviously, people are increasingly skeptical about the services provided by the UK.”

He said that it is “difficult to see” how the national system that allows cross-border access is consistent with the committee’s proposal.

The new measures proposed by Brussels restrict cross-border activities from non-EU countries to “reverse solicitation”, that is, customers approaching banks without any marketing from the agency.

“Most parts of Western Europe have some kind of cross-border licensing system,” said Caroline Dawson, a lawyer at Clifford Chance. She said that the new measures would “abolish all these measures,” adding that reverse solicitation is difficult to prove and cannot be carried out on a large scale.

She said that the restrictions proposed by Brussels would “reduce people’s choices and thus reduce people’s business volume.”

An executive of a large international bank said that although his bank can use its subsidiaries and branches to replace cross-border arrangements, the way the measure is implemented makes them nervous about the unpredictability of EU policymaking. “This is not an impact assessment or consultation,” he said.

The Brussels proposal reinforces the general requirement under the current EU rules that non-EU banks should have branches or legal entities in the member states in which they wish to conduct business.

Dawson said that the national access systems of Ireland and Luxembourg are the most flexible in the EU. If the service provider is actually in the country, Luxembourg usually only needs a license. Ireland allows most cross-border activities as long as they do not involve retail customers.

The Luxembourg regulator did not respond to a request for comment. The Irish Central Bank said it is “reviewing all aspects” of the European banking package.

The Swiss Bankers Association stated that “grant Swiss financial institutions with cross-border market access to the EU… Contribute to an open and integrated market, so it is in the interests of EU investors and ultimately in the interests of the EU”.

“The European Parliament and the Council of the European Union may modify the new rules,” the SBA added. “We will carefully analyze the possible impact of the proposal with our members. At this point, it is too early to make a conclusion.”

The European Commission declined to comment.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *