Brussels pushes to freeze out London banks in post-Brexit crackdown
The EU is planning on freezing out London banks by clamping down on the network of national arrangements that allow non-EU banks to sell services to the bloc.
Brussels is pushing to cut off avenues for banks operating outside the region to conduct cross-border transactions.
The news was first reported by the Financial Times.
The post-Brexit power grab would strengthen EU authorities’ hand to manipulate banking and financial services activities within the region.
The push is part of the European Commission’s capital requirements directive and still needs to be approved by the EU’s parliament and council.
Non-EU banks rely on having access to the bloc’s markets as it is cheaper and less resource intensive to conduct work from their international centres based in the region.
Cross-border permissions have long been used by American and Swiss banks.
London based banks have historically not needed to use cross-border arrangements due to the UK being in the EU. However, after Brexit, they have provided a crucial route to EU markets for City banks until a deal on financial equivalence between London and Brussels is reached.
Experts warned the EU could hamstring its ability to engage with financial institutions beyond its borders and eat into member states’ sovereignty over their financial services regulatory regime if Brussels pushes ahead with the plans.
Tim Dolan, partner at Reed Smith, told City A.M.: “This approach would dramatically limit the ability of European countries to regulate themselves independently.”
“It will also impact the ability of European institutions to transact with non-European institutions.”