Banks based in the UK and US are expected to use an exemption in forthcoming EU rules to continue lending to clients in the bloc, Reuters reported.
The provision, known as “reverse solicitation”, will allow a bank to provide lending where an EU client has contacted the bank without prior approach from the lender, according to three lawyers and two industry sources.
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The EU will introduce the restrictions from January, the report said.
Banks that are not established in the bloc will no longer be able to provide many services directly to EU clients unless they have an authorised branch or subsidiary there.
The requirements will apply to loans entered from July this year.
A European Commission spokesperson said the reverse solicitation exemption would normally be relevant when EU companies invested outside the bloc.
The spokesperson was responding to questions about the anticipated use of the exemption by non-EU banks.
The changes form part of the EU’s CRD VI directive.
They replace national rules that have allowed different levels of cross-border lending across member states with a single EU-wide framework.
A British banking industry source said CRD VI would affect every foreign bank with operations in Europe.
The source described the changes as the largest interruption to cross-border lending into the EU since Brexit.
The European Commission said that Britain’s exit from the EU had increased the need for a harmonised banking regime across the bloc.
Several major British, US, and Asian banks already have authorised EU subsidiaries, including HSBC, NatWest, and Goldman Sachs, the news agency noted.
However, the British banking industry source said lenders would probably not be able to preserve all current EU lending through “reverse solicitation” and other exemptions.
Some banks may have to allocate further capital in the bloc, increasing their EU balance sheets by more than 10%, the source said.
Lloyds, Huntington, and PNC are among the larger banks without an EU subsidiary.
Huntington said any lending to EU clients would be conducted from the US through reverse solicitation.
