Foreign banks plan to use an exemption to keep lending into the EU

what happened

According to Reuters, citing people familiar with the situation, some banks in Britain and the US intend to keep lending into the EU next year by relying on the reverse solicitation exemption. It applies when an EU client approaches a bank on its own initiative.

From January, Brussels will bar non-EU banks from providing many services directly into the bloc unless they operate through an authorised branch or subsidiary. The rules will cover loans entered into from July this year. Lawyers and industry sources told Reuters that how widely the exemption can be used, and whether supervisors will tolerate long-term reliance on it, remains uncertain.

why it matters

The new regime aims to level the playing field across EU banks and replaces a patchwork of national rules. According to the BIS, British banks had about $1.4 trillion of lending to euro zone borrowers at the end of June, so the restrictions could affect EU credit supply and the euro over time.

market impact

British and US banks: EU cross-border lending limits may shrink their business and require extra capital.

• ▼British and US banks pressure down — limits on cross-border lending into the EU narrow their business and may require extra capital

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