A leaked European Commission paper indicates that banks in the EU may soon have greater scope to shift funds between member states, reported Financial Times (FT).
The document points to possible capital relief for mortgage lending and for loans to companies that do not have credit ratings.
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The draft, reviewed by the FT before its expected release next month, sets out a wider agenda on banking competitiveness.
It includes proposed changes to deposit insurance arrangements across the bloc and a review of capital rules affecting investment firms.
According to the paper, the objective is to address the weaker performance of European lenders relative to US competitors. However, the measures do not go as far as the broad cuts to capital requirements that banks have been seeking.
Lenders have argued for years that multiple layers of requirements from supervisors, resolution bodies and national authorities constrain their ability to lend.
The Commission sets out three core obstacles facing the sector: fragmentation within the EU banking market, the need to tailor international standards to the bloc’s own characteristics, and rules described as “unduly complex and burdensome”.
Under the draft, supervisors would receive authority to check that capital and liquidity standards are satisfied at parent company level, instead of resources being locked inside subsidiaries in different member states.
If enacted, the change would give major banking groups more room to allocate resources across borders.
“The Commission will propose to enhance efficiency in the group-wide allocation of capital and liquidity within the single market,” the report states.
At the same time, parent companies would face a legal duty to send resources to subsidiaries when required.
The proposals are likely to revive a prolonged political argument between states that host the main offices of large banking groups and those concerned about losing authority over resources held by domestic subsidiaries.
The paper also signals an effort to simplify capital rules for banks, including plans to “consider reducing the number of buffers and improving their design and calibration”.
