The European Commission was made aware that national bank supervisors imposed “allegedly disproportionate prudential measures” on subsidiaries of cross-border EU banks “on several occasions,” it said in a statement.
The Commission requested all national bank supervisors in the EU to give information about their current practices by the end of February, “in order to have a full and complete picture of the measures which have been taken, and the procedures followed.”
“The Commission will carefully consider this information and determine any possible further steps as appropriate,” it said.
Although reluctant to name the countries that were imposing measures that amounted to restrictions to the free flow of capital, banks, particularly Western banks in Central and Eastern Europe, have complained repeatedly that the various regulations affected their ability to do business and breached EU rules.
“During the financial crisis, a lot of countries, actually all countries in Europe, have set up fences in order to safeguard their local financial markets from the influence of the financial crisis,” the CEO of Austrian Erste Bank Andreas Treichltold Emerging Markets in Vienna last month.
“Europe was here to help borders fall, but in terms of liquidity and capital, during the last four years borders were set up again,” Treichl said.
Erste Bank is the second-largest bank in Central and Eastern Europe. Hot on its heels is Raiffeisen Bank, whose CEO voiced the same concerns.
“One country is forbidding us to transfer dividends; other countries are forbidding us to transfer liquidity within the group,” Herbert Stepic, the CEO of Raiffeisen Bank, told Emerging Markets in January. “I can’t mention the countries because I still want to do business tomorrow in those countries. But that is contradictory, I mean I cannot satisfy my investors’ needs for dividends, and I can’t transfer [the cash],” Stepic said at the time.
The Commission said that the alleged measures it would look into include capital controls, restrictions on transfers within the same group, imposing limits on the activity of branches or forbidding the expatriation of profits.
“These would have the effect of ‘ring-fencing’ assets, which could, in practice, restrict cross-border transfers of banks’ capital and potentially constrain the free flow of capital throughout the EU,” it said.