Missed targets and misplaced incentives? The case of parent undertaking requirement in the USA and in the EU

Abstract

Abstract Currently, most of the legal acts or even non-binding standards in the field of banking law strive to achieve a golden middle between financial stability and globalized development. Apart from the widely discussed post-crisis regulatory actions concerning for example capital buffers, leverage, or liquidity, there has been one relatively recent requirement that also influences the functioning of global banks. The intermediate holding company requirement introduced in the USA and the EU intermediate parent undertaking rule require foreign banks to establish a separate entity in the host country that would group under one roof all their subsidiaries incorporated in the respective jurisdiction. This paper offers a comprehensive comparative analysis of these legal structures, clarifying regulators’ objectives behind the concept, assessing its functioning in the US and EU regulatory frameworks and potential indirect consequences, which indicate that this solution does not fulfill its regulatory goals and thus does not contribute to the balance between financial stability and globalization.