Not Equivalent (Yet?): The Current EU Third Country Regime for Credit Institutions and Incoming Changes

Abstract

As part of the European Commission’s “Banking Package”, introducing a series of amend-ments to the key legal sources of EU banking regulation, a comprehensive proposal for the treatment of Third Country branches of credit institutions (i.e., branches of institutions li-censed by non-EU jurisdictions seeking authorisation in an EU Member State) has been pre-sented. If and when ultimately adopted, this new framework will, for the first time, harmo-nise the applicable authorisation procedures and substantive conditions for authorisation hitherto left exclusively to the discretion of EU Member States. Under the new regime, the equivalence of Third Country regulatory and supervisory approaches with EU banking regu-lation will play a role, albeit a limited one. While taking up, and refining, approaches that have been present in a range Member States for some time already, the new framework will require others to fundamentally change their existing regimes. The new amendments will be of particular relevance for the future regulatory relationship between the United Kingdom and the European Union, since a bespoke arrangement for continuing access of UK financial intermediaries into the EU markets has not been accomplished, and UK credit institutions wishing to continue to operations within the EU other than through legally separate and independently capitalised subsidiaries have to rely on authorisations as Third Country branches. Against this backdrop, the present paper presents a functional analysis of the in-coming regime in light of experiences made with regard to the existing landscape of diverg-ing national laws.

Keywords: Third Country regime, credit institutions, equivalence, Brexit

JEL Classification: G15, G18, G21, K19, K22, K23