Chancellor of the Exchequer Philip Hammond has said he opposes the European Union’s prudential reform proposals for banks.
The European Commission has put forward a number of proposals to change some element of its prudential regulation.
This includes a requirement to make some banks set up “intermediate holding companies” for their EU operations as well as a number of exemptions in the leverage ratio.
Holding companies could be forced by EU regulators to meet tougher capital rules and other standards intended to make sure that they can be safely wound down if they fail.
Mr Hammond said the government supports European reforms of the leverage ratio which will align regulation with international standards.
But he said he had opposed the holding companies proposal at Ecofin, a meeting of European finance ministers.
Mr Hammond said: “At Ecofin I also made clear the government’s concern with the Commission’s proposal on intermediate holding companies, where we share the concerns outlined by the [Prudential Regulation Authority].
“We are particularly concerned with the way the Commission introduced the measure, without prior discussion with member states or any substantive impact assessment.
“This process has not, in my view reflected the better law making principles agreed collectively by the Council, European Parliament and Commission last year.”
Along with the PRA, the Treasury Select Committee’s chairman Andrew Tyrie has also expressed scepticism about the reforms.
He said they appeared to be “as illogical as they are unreasonable”.
Addressing the holding company proposal, he said one “uncharitable” interpretation for the reform would be that this is retaliation against the United States, which has already taken similar action.
Mr Tyrie said: “It is reassuring that the Government shares the PRA’s concerns about the Commission’s initial reform proposals.
“The UK is leaving the EU, but until a final agreement is reached it is imperative that the Government continues to defend the UK’s interest in the Council on this and many other issues.”
damian.fantato@ft.com
