New EU Rules Would Force Big Foreign Banks to Hold More Capital in the Bloc
Posted by hkarner - 23. November 2016
Source: The Wall Street Journal
Proposals would affect banks identified by regulators as institutions of significance to global financial system
BRUSSELS—The European Union will propose new rules this week requiring big foreign banks to hold extra capital and liquidity inside the bloc, a step mirroring U.S. regulations aimed at strengthening oversight of overseas banks, EU officials said.
The proposed rules, part of a raft of financial legislation being proposed Wednesday by the European Commission, the bloc’s executive arm, are meant to simplify procedures when a bank is wound down and to make sure that EU governments aren’t left holding the financial bag when big foreign banks fail.
EU institutions recently have taken over responsibility from the EU’s national agencies for the supervision and winding down of the bloc’s largest banks.
The proposed rules would affect banks that have been identified by regulators as institutions of significance to the global financial system as well as those with assets in two-or-more EU countries of at least 30 billion euros (about $31.9 billion), one official said.
They would require some big U.S. and other non-EU banks—including British banks once the U.K. leaves the EU—to restructure so they don’t hold all of their capital outside the bloc.
When introduced, the U.S. rules were criticized as inhibiting the efficient flow of funds within global banks but were defended as reflecting legitimate concerns about financial stability following the 2008 financial crisis.
The proposals must be agreed by both EU governments and the European Parliament and could be rejected or amended. This process could take a year or more.
The development was first reported by the Financial Times.