EU Drafts Law for Non-EU Banks

Top American or Asian banks will have to hold enough capital buffers for their activities in the European Union to face crisis without help from their headquarters, a draft EU law says, according to officials familiar with it, CNBC reported. The provision is included in a reform of EU rules for banks’ capital requirements aimed at ensuring that large lenders are able to sustain significant losses without requiring a state bailout. Non-EU global systemic banks or foreign lenders with EU assets of at least €30 billion ($31.86 billion) will be required to set up an “intermediate parent undertaking” for their entities in the EU, which will need to abide by capital requirements as a stand-alone company, regardless of the financial soundness of its parent company, according to the draft proposals. This is likely to increase costs for the EU operations of large US banks, such as Citigroup, JPMorgan Chase or Goldman Sachs, and for their Japanese and Chinese counterparts with activities in the EU.