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Banking

Regulation: Why in-house must talk to Europe

European in-house must engage more with regulators to ensure their banks' business models and practices are fully understood, or risk supervision that is ineffective and restrictive.

And it's especially urgent for large cross-border banks to make themselves heard above the political wrangling of the European supervisory authorities.

"There's a significant concern over the new authorities' ability to get their arms around what you do, how it works, and what the consequences are," said Allen & Overy regulatory partner Bob Penn. He appealed to banks to push for a more active role in regulatory discussions.

"Banks need to get into Europe and make sure regulators are up to speed," he said. "If they don't understand your business you're going to end up with the wrong regulation."

Penn cited uncertainty over amendments to the Capital Requirements Directive as an area where banks needed to interact with regulators and ask the right questions. At the moment there is a lack of clarity over the Directive's grandfathering provisions.

It has left some concerned that new retention rules could force them to go back to the market and retrospectively buy back tranches of their existing securitisation transactions.

"This is a call to arms for big banks," said Penn.

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