14 June 2023

FT: Banks alarmed at threat of EU crackdown on cross-border access

The world’s biggest investment banks are growing increasingly alarmed about a looming crackdown by Brussels on their ability to sell services into the EU. In late 2021, Europe backed away from plans to ban so-called cross-border access, with banks furious at the prospect of having to move capital and liquidity into the EU, rather than fund business using their global balance sheets.

However, a clampdown on cross-border selling is once again under active discussion as the EU tries to assert greater control over its financial markets. The European Council, parliament and commission are close to finalising a deal that would curb access as part of a broader package ostensibly designed to introduce the latest Basel rules on global bank capital. “It’s becoming part of the end game of the conversations and a deal will be about how many restrictions to their services banks will face,” said a person familiar with the discussion, adding that a decision was expected by Thursday at the earliest.

However, others cautioned that a deal could still fall through. Earlier this month, officials circulated a technical paper outlining a range of options for the crackdown and banks see some form of restrictions as inevitable. “It’s a big deal, we’re talking big numbers if this lands in the wrong place,” said an executive at a large international bank, echoing concerns shared privately by Citigroup, HSBC, JPMorgan Chase, Morgan Stanley and Goldman Sachs. The proposals fall short of the original ban but large international banks say they remain very concerned about the impact of the measures on their businesses, particularly on their ability to do big trades in small countries or with obscure currencies. “It’s difficult to say how difficult this will be,” said an executive at a second large bank, adding that it could be either “costly but liveable . . . or completely unworkable”...

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