Brussels Proposes End to Banks’ Cross-Border Services Sales from Outside EU

Brussels has proposed an end to almost all cross-border selling of services by banks based outside the European Union, according to a Financial Times report Monday (Nov. 22), a move that could hurt lenders in London and other financial institutions without staff or a solid presence in the region. 

The move to close the borders will streamline how global banks operate across the European Union. Brussels is also trying to give more powers to regulators to transform some of their branches into subsidiaries with more oversight, FT reports. 

The European Commission’s capital requirements platform is working to end discrepancies in what’s allowed in different nations across the union. Europe’s parliament and council still need to approve the changes. 

European Central Bank officials are attempting to squash the post-Brexit use of national arrangements and waivers on cross-border business, a setup that’s been used for a while by banks based in the U.S., Switzerland and Asia for some of their activities in the Union. 

Brussels’ proposal limits cross-border activity from non-EU countries to “reverse solicitation,” with a client approaching a bank without any marketing. The plan would also “strengthen a general requirement under the EU’s existing rules” requiring non-EU banks to either have a branch or a legal entity in the country where they plan to do business. 

Luxembourg usually requires a license only if the service provider is in the country, while Ireland allows most cross-border activities, except when retail clients are involved. 

Related: Banks Ask EU to Continue Access to UK Clearing Houses 

Meanwhile, Brussels’ failure to extend a license granting EU banks access to U.K. clearing houses past the middle of 2022 could cause “major” market disruption. 

Banks in the U.S. and Europe, as well as asset managers, are pushing for the license extension and lobbying groups have asked the European Commission for more time to allow the market to transition business away from the U.K.