The salvo from what constitutes the majority of banks targeted by the proposal came in a letter to EU officials overseeing the consultation on so-called intermediate parent undertakings.
The plans would force the world’s biggest banks to have additional capital and liquidity in the EU so their subsidiaries could better withstand a crisis and be separately wound up if needed by European authorities. The rules are Brussels’ retaliation to similar measures introduced by the US in the wake of the financial crisis.
“We believe there is a risk that severe direct and indirect negative consequences might ensue,” reads the letter. “If the EU businesses of third country groups suffer increased costs entailed by the IPU requirement, such groups may well decide to exit such businesses, reducing choice for EU consumers of financial services and reducing competition.”
The proposal, first made last November, immediately sparked controversy, with the UK pledging to fight the measure. It is shaping up to be a big fight between the UK and Brussels before Brexit. Luxembourg has also emerged as a strong opponent of the plan. Some other governments have called on Brussels to carry out an “impact assessment” of how the measure would work in practice.
If Brussels pushes ahead with IPUs, the banks want a four-year lead time, particularly because they are already having to restructure their European operations because of Brexit, the letter reads. The banks argue that the proposal runs counter to pledges made on a global level for supervisors to work more closely together when winding up big banks, and for those lenders to hold special debt that can be converted into equity.
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