Some banks in Britain and the United States are set to employ an exemption in new European Union cross-border rules to keep lending into the bloc next year, people familiar with the situation told Reuters, as Brussels tries to channel more activity through firms it supervises in Europe.
The banks plan to continue lending from their home countries by relying on a "reverse solicitation" exemption, which permits lending where a European Union client has approached them on its own initiative, three lawyers and two industry sources said. From January, Brussels will bar banks not based in the EU from providing many services directly into the bloc unless they operate from an authorised branch or subsidiary. The rules will apply to loans entered into from July this year.
Introduced under the EU's CRD VI directive, the new regime replaces a patchwork of national rules with a common framework and is designed to level the European playing field. A British banking industry source said all foreign banks with business in Europe were affected by CRD VI, which they called the most significant disruption to cross-border lending into the EU since Brexit. Data from the Bank for International Settlements shows euro zone borrowers owed banks based in Britain about $1.4 trillion as of the end of June.
How broadly reverse solicitation can be used — and whether supervisors will allow widespread longer-term reliance on it — is uncertain, several of the people said, adding that banks are in talks with supervisors over how exemptions will be applied. Claude Wampach, director of banking supervision at Luxembourg's financial regulator CSSF, said reverse solicitation was narrowly drawn and no "silver bullet" for business as usual.
Many of the largest banks in Britain, the U.S. and Asia already have authorised EU subsidiaries, including HSBC, NatWest and Goldman Sachs. Among the large lenders without an EU subsidiary are Britain's Lloyds and U.S. banks Huntington and PNC. Huntington said any lending to the EU would be through reverse solicitation from the U.S., while Lloyds said it had authorised branches in Luxembourg and the Netherlands, which allowed it to continue lending in those two countries only.
