An EU crackdown on the ability of banks outside the EU to sell services in the bloc is intended to focus on “core” banking activities, a senior EU official said, in terms that will alleviate industry concerns that Brussels is pursuing more extensive restrictions. .
EU executive vice-president Valdis Dombrovskis said it would be up to the bloc’s council of ministers and the European Parliament to clarify the scope of the rules when drafting legislation in the coming months. But he stressed that the provisions contained in the legislation proposed by the committee “were primarily aimed at covering basic banking services”.
He added: “The provision of basic banking activities is conditional on the existence of an establishment in a Member State, ie a branch or a subsidiary. . . it must be said that these demands were implicitly already there de facto.
The crackdown on cross-border sales is part of the commission’s latest rules on bank capital requirements, which will provide a legal basis for the global Basel III bank capital standards. Among the provisions are new powers for regulators to require banks to turn certain branches into more closely supervised subsidiaries, as well as stricter rules on which services can be sold by non-EU groups without any physical branches or subsidiaries. in union.
The latter provisions have caused the most concern among lawyers and bank lobbyists, as the drafting of draft legislative proposals by the committee appears to stop almost all cross-border sales from non-EU countries in the single market. of the block. This could encompass investment banking and other market activities covered by separate rules in the Markets in Financial Instruments Directive, and not just traditional banking activities such as loans and deposits.
The Brussels proposals aim to strengthen a general EU requirement that banks elsewhere should have a branch or legal entity in a member state where they wish to do business.
National access regimes in Ireland and Luxembourg are among the most flexible in the EU. Luxembourg generally only requires a license if the provider of a service is physically located in the country, while Ireland allows most activities on a cross-border basis as long as they do not involve retail customers.
Some bankers and lobbyists believe the EU has inadvertently drawn the provisions of the Basel III package too loosely, and signaled that the door is open for the language to be narrowed down.
The committee wanted the drafting to “implicitly” exclude market activities covered by the Mifid regulation, which allows cross-border sales, a lobbyist said. “Anything that made him less aggressive would. . . be useful, ”said a senior executive at a major international bank.
“It will now be up to Member States and the European Parliament to take these proposals forward to clarify the scope,” said Dombrovskis.
The banking package, he added, “brings clarity whereby companies from third countries can offer banking services within the EU, which will ensure that all market players are on a level playing field. equality, and that our supervisors have the tools to protect financial stability. of the Union and its Member States ”.
The new EU provisions have also come under scrutiny in other jurisdictions. Sam Woods, the head of the Bank of England’s Prudential Regulatory Authority, recently said the UK would not engage in a tit-for-tat game of restricting market access for European groups.
Additional reporting by Martin Arnold in Frankfurt