The ABBL welcomes the political agreement reached by EU lawmakers on the new rules for Third Country Branches on Tuesday 27 June.
Representatives from the European Parliament, the Council and the European Commission struck a political agreement on several key topics of the new banking package implementing the final Basel III standard into EU legislation, i.e. the Capital Requirements Directive (the CRD) and the Capital Requirements Regulation (the CRR).
Rebalancing the proposal to preserve the attractiveness of the EU
Among the issues at stake in the agreement (Output floor, Fit and Proper assessment), the rules governing the prudential requirements and the supervision of Third Country Branches (TCBs) is highly relevant for the ABBL and its members. Since the publication of the EU Commission proposal amending the CRD in October 2021, the ABBL has drawn the attention on some of the unexpected or unintended consequences of this far-reaching proposal, which it fears would:
- Significantly restrict the flow of financial services and products that third country providers could offer going forward to EU banks and other clients;
- Create a legal uncertainty which may eventually negatively impact the attractiveness of the EU market for third country service providers;
- Prove to be inconsistent with existing well-established EU financial regulatory frameworks, notably the MIFID/MIFIR regime allowing third country firms to provide investment services on a cross border basis to eligible counterparties and professional clients.
Against this background, the ABBL has been continuously advocating a rebalancing of the proposal to preserve the attractiveness of the EU as a financial centre towards the rest of the world.
Our advocacy efforts have borne fruit
Today, we at the ABBL are pleased to see that our advocacy efforts paid off, considering the following outcomes:
- The scope of the proposed regime (art. 21c and 47 CRD) has been narrowed to core banking activities, excluding notably MIFID investment services and the related ancillary services, intragroup transactions and transactions between EU banks and Third Country banks;
- Cross-border transactions between TCBs of a same group are permitted if they are made for funding purposes;
- The procedure for assessing TCBs’ systemic importance, which triggers potential remedial supervisory measures, has been made consistent with the existing allocation of supervisory powers, where national supervisors will keep the final say for the TCBs established in their jurisdiction. Also, the threshold triggering the assessment has been increased from EUR 30 billion to EUR 40 billion in terms of TCBs’ aggregated assets in the EU.
Overall, the political agreement provides fair conditions of access to the European market while preserving the competitive position of European banks. In the challenging times we are going through, this is undoubtedly a win-win situation for European and non-European financial services.
The agreement has been agreed 'ad referendum' and is therefore provisional as it still needs to be confirmed by the Council and the Parliament before it can be formally adopted.
Contact Gilles Pierre, Head of Banking Regulation & Financial Markets at the ABBL