26 November 2007

BBA paper: Regulating a multi-jurisdictional bank

The BBA issued a paper on regulating a multi-jurisdictional bank - What cross-border banks want from the EU, stating that regulatory cooperation across borders without political protectionism is essential to achieve the objectives of the Lisbon Strategy.

The paper sets out the key principles which should govern the EUs regulatory framework.

The report states that the EU needs to concentrate on a supervisory convergence model which includes closer supervisory working; sharing of techniques; use of common processes; and elimination of duplication. There should also be a “college” of banking regulators from the relevant EU countries for each cross border bank.

The further development of the lead/consolidated supervisor model should provide one point of contact between the bank and the regulator.

The paper sees discrimination and uncertainty in tax rules are major obstacles for financial services regulation. Resolution of this would be best achieved by having clearer and more coherent legislation and regulations, particularly for those entities which operate in more than one jurisdiction.

A main concern of internationally-oriented banks in London, the paper states, is that the EU should resist taking forward initiatives that would result in greater legal uncertainty. For instance, the Rome 1 Regulation on choice of laws could introduce uncertainty as to which law might apply to a contract. This could act as a barrier to banks entering cross-border business, impacting the momentum towards greater integration.

Finally, the Commission should be vigilant in ensuring that cross-border mergers between EU banks are not prevented by restrictive practices, such as the desire to build up “national champions”.

Full report

© Graham Bishop