The EU is proposing to ease bank regulation, to allow concentration and so-called “integration” of the capital market. Capital requirements should be met at the level of the parent company, and not at the level of national subsidiaries, the draft proposal says, according to the Financial Times. This, presented as a way to potentially liberate up to 250 billion Euro in cross-border capital flows—read speculation—amounts politically to a “de-nationalization” of banks, as national supervisors will lose control over subsidiaries, critics say. Although all EU member countries apply EU minimal requirements, different countries apply additional buffers.
Take the example of a parent bank incorporated in Luxemburg, which is a tax haven, and subsidiaries in Italy. Whereas Luxemburg, with a tiny economy, hosts mostly international investment bankings, with de facto no additional buffers, Italy is characterized by traditional commercial banking, with several additional regulations related to risk, customer protection etc. The new EU regulation would jeopardize the residual risk-control at the national level, by extending the Luxemburg lightweight regulations to the subsidiaries.
