The Department for Exiting the EU has published a note dated 30 November 2017 concerning the European Central Bank’s (ECB) opinion of 8 November 2017 regarding amendments to the EU framework for capital requirements of credit institutions and investment firms.
The note states that the UK Government broadly welcomes the ECB opinion. In particular, it sees merit in proportionality of reporting and the need for further specification on the supervisory measures a consolidating supervisor may apply to a holding company.
However, the UK Government also holds views that differ from the ECB in a number of areas including with regards to a longer transitional for third country central counterparties while their equivalence is being assessed, the expansion of the EU list of infringements subject to sanctions, and the opinion on the fit and proper assessment of key function holders.
In particular, the Government’s view diverges from the ECB opinion in the following ways:
- the UK Government strongly oppose the ECB’s opinion that EU subsidiaries and branches should trigger an EU intermediate parent undertaking (IPU) requirement. Under this suggestion, an IPU requirement would be triggered if there were two or more institutions or EU branches in the EU without a common holding company. The UK Government opposes this as this enforced subsidiarization of EU branches of third country firms reduces flexibility for valid presences to be established and decreases, rather than enhances, proportionality of this measure; and
- certain options and national discretions are relied on in the UK for the purposes of ensuring financial stability. The UK Government therefore objects to the ECB views which undermine these arrangements including that with regards to the ECB opinion on national powers and options and discretions.