Deloitte comments on the European Commission’s banking reform proposals

On today’s package of legislative proposals, David Strachan, Partner in Deloitte’s EMEA Centre for Regulatory Strategy, said:
“Today’s proposals challenge the increasingly fragile state of international regulatory coordination.

“The proposed intermediate parent company requirement for non-EU banks creates new uncertainties, while the EU’s preparedness to depart from some elements of agreed Basel texts could undermine progress towards global capital standards.

“Past experience teaches us that the EU’s legislative negotiating process can be long and drawn out. Regulatory reform will clearly stretch into the next decade: regulatory uncertainty seems set to stay.”

On the Commission’s proposed revisions to the bank prudential framework, he commented:
“The EU is proposing major changes to the bank capital framework at a challenging political and economic time. Regulators want to “finish the job”, but are also acutely aware of pressures on bank business models, and the need for bank lending to help stimulate economic growth.

“The European Commission is trying to do a balancing act here – introducing tough new requirements in some areas, while offering concessions elsewhere in the name of proportionality and growth.

“This shows a willingness within the EU to depart from global standards, at a time when the international debate appears increasingly fractious ahead of next week’s critical Basel Committee meeting.”

Commenting on the Commission’s proposals to require third country banks to establish EU intermediate parent companies, he said:
“Many non-EU banks have been restructuring their EU operations for some time, driven by business model and resolvability considerations. But in the last six months, the outlook for bank structures has become foggier, not clearer. 

“The UK’s decision to leave the EU creates uncertainties over the terms on which UK-based firms will access EU markets in future, and this has now been compounded by the European Commission’s decision to propose an intermediate parent company requirement for a number of non-EU banks.

“This continuing regulatory uncertainty does not help banks looking to take significant decisions about their long-term strategies and business models across the EU.”

End

Notes to editors

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