Japan, China bank groups challenge EU changes

Reuters LONDON (Reuters) — The Japanese Bankers Association (JBA) and the China Banking Association (CBA) have joined forces to challenge proposed European Union regulations aimed at policing possible market risk posed by foreign lenders doing business in the bloc.

In a letter to the European Commission seen by Reuters, the JBA and CBA — which represent hundreds of lenders from both Asian economic powerhouses — said a draft proposal to compel foreign banks to bring EU operations under a single holding company threatened the commercial viability of their activities in the region.

The trade bodies, whose members include Japan’s largest lender MUFG Bank and the Industrial and Commercial Bank of China, said that the so-called intermediate parent undertaking (IPU) could trigger “multi-million one-off reorganization costs” and significant ongoing charges.

“The IPU requirement potentially makes our business model in the EU unsustainable, and could affect our fundamental capabilities to provide financial services to EU clients,” the letter said.

“In short, the IPU proposal makes the EU a less attractive place for us to deploy our capital and do business.”

News of the challenge is the latest headache for the EU as it seeks to step up vigilance of non-European lenders operating within the bloc, as part of efforts to safeguard the region’s economy from another banking crisis.

In February, Reuters reported that Bulgaria, which currently holds the EU presidency, had called for a softening of the proposed rules, saying that the requirement to set up a single holding company should only kick in when a foreign bank has total assets of at least €40 billion in the EU.Speech

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