HELSINKI, March 27 The European Union should
tighten supervision of banks turning their euro zone
subsidiaries into branches that are regulated outside the bloc,
Finland's Central Bank and its Financial Supervisory Authority
(FSA) said on Monday.
Helsinki's worries were prompted by a reorganisation by
Sweden's Nordea to make its Finnish operations branches
rather than using a subsidiary structure. Denmark's Danske Bank
has similar plans.
Nordea and Danske together hold about 40 percent of total
loans and deposits in Finland's banking market and account for
about half the bank branches in the country.
Turning subsidiaries into branches, a practiced dubbed as
"branchification", means a large portion of Finland's banking
will be supervised by Swedish and Danish authorities, instead of
the European Central Bank or Finnish authorities.
"Dependence on branches operated from outside the banking
union, as witnessed in Finland, is increasing," Bank of Finland
board member Olli Rehn said in a speech on Monday.
"Larger powers of the host country supervisor would support
the financial stability of host and home countries alike, and
reduce the room for regulatory arbitrage," he said.
The FSA's director general, Anneli Tuominen, has proposed
closer cooperation between the supervisors in the host nation
and home country of the cross-border banks.
"There should be specific requirements for a joint agreement
on most important decisions, such as capital and liquidity
requirements, model approvals, approval of recovery plans and
issues relating to authorizations", Tuominen wrote in a letter
Olivier Guersent, the EU Commission's financial services head.
(Reporting by Tuomas Forsell; Editing by Edmund Blair)