INSTITUTIONS including Lloyds Banking Group and Royal Bank of Scotland will be hit by an overhaul of European rules giving regulators greater powers over combined banking and insurance groups.
The European Commission (EC) yesterday put forward plans to tighten oversight of “financial conglomerates”, defined as firms that lend and provide cover across multiple European states. As well as taxpayer-backed Lloyds and RBS, Barclays, HSBC, Old Mutual, Prudential and Standard Life are among those who fall into the category in the UK.
The revised measures are designed to help national watchdogs such as the Financial Services Authority (FSA) clamp down on the multiple use of capital, whereby funds in an entity are used to calculate the capital strength of both the entity and its parent company. They are also intended to make it simpler for regulators to spot risks hiding in complex group structures and holding companies.
The EC, led by José Manuel Barroso, said the rules would remedy “unintended loopholes identified in the context of the financial crisis”. The Commission aims to pass its proposals into law by the start of 2011, after discussions with?European Union member states .