UK chancellor of the exchequer Philip Hammond, a member of the EU Parliamentary committee responsible for financial regulation (Econ), was not the only one who was taken aback at a committee meeting in early December.
The committee was discussing the updates to the Capital Requirements Regulation and Capital Requirements Directive IV proposed by the European Commission on November 23. This included a provision that would force larger third-country groups with two or more subsidiaries in the EU to create intermediate holding companies subject to internal capital requirements. Hammond was said not to have seen it before.
21b
This proposal – article 21b of the Banking Reform Package – is seen as even more onerous than US requirements. Law firm Allen & Overy says it will have a “profound” impact on costs and operational complexity for many non-EU headquartered firms.
“The inclusion of intermediate holding companies [in the proposals] isn’t great,” says one senior official at an industry lobby. “If everyone did it, what would be the purpose of having a global resolution framework?”
Early drafts of the proposals were leaked, but market stakeholders in the UK confirmed that none of those leaks included that provision.