January 30, 2018

CBRC published a joint comment letter on the proposals from EC to further strengthen the resilience of EU banks; this relates particularly to Article 21b of the Capital Requirement Directive (CRD) that requires non-EU groups above certain threshold to establish intermediate EU parent undertakings (IPU) in the EU. This joint comment letter by the People’s Bank of China and CBRC was sent to the EC, the Council of the EU, and the European Parliament.

CBRC welcomed the presidency compromise from the EU Council on November 27, 2017; specifically the removal of the requirement that any global systemically important institutions (G-SII) from a third-country group, regardless of the number of institutions it has, shall establish an IPU in the EU. However, certain aspects of the proposed amendments to the CRD, along with the respective comments from the Council of EU and ECB, need further consideration. CBRC has raised concerns on the following issues:

  • Chinese authorities have not imposed any comparable IPU requirements on foreign financial institutions in China.
  • Considering that the intended supervisory benefits may not be proportionate to the potential compliance cost, CBRC suggested reconsideration of the threshold of EUR 30 billion for the proposed EU IPU requirements (as a reference, the US Intermediate Holding Company (IHC) requirements have a threshold of USD 50 billion of total assets in the US, excluding those of branches).
  • CBRC also suggested reconsideration on the appropriateness of calculating total assets, including those of branches, and incorporating existing branches into the new IPU.
  • The supervision of financial holding companies and mixed financial holding companies needs clarification.

 

Related Link: Joint Comment Letter

Keywords: Asia Pacific, Europe, China, Banking, CRD, IPU Proposal, Basel III, G-SII, EC, CBRC

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