Some foreign banks plan to use exemption to keep lending into EU
XLF•Some UK and US banks plan to rely on an EU reverse-solicitation exemption to continue lending into the bloc under rules taking effect next year. The rules restrict many services from non-EU lenders, and UK banks lent about $1.4 trillion to euro zone borrowers as of the end of June.
1. New cross-border rules
From January, EU rules will bar banks based outside the bloc from providing many services directly unless they operate through an authorised branch or subsidiary. The rules, introduced under the CRD VI directive, apply to loans entered into from July this year and replace differing national regimes with a common framework.
2. Exemption use uncertain
Some banks plan to use the reverse-solicitation exemption, which permits lending when an EU client approaches a lender on its own initiative. Lawyers and industry sources said its scope and longer-term use remain uncertain; Luxembourg banking supervisor Claude Wampach said it was narrowly drawn and no “silver bullet” for business as usual. Some lenders may need to commit more capital to the bloc, potentially expanding their EU balance sheets by more than 10%, an industry source said.
3. Lender preparations
Banks including HSBC, NatWest and Goldman Sachs have authorised EU subsidiaries. Lloyds said its authorised branches in Luxembourg and the Netherlands allow it to continue lending only in those countries, while Huntington said EU lending would use reverse solicitation from the US. Some large US banks without an authorised European subsidiary are building compliance programmes around the exemption, said lawyer Matt Bisanz.
