New rules issued by the Bank of England pose a threat to the existence of several bank branches including Indian banks operating there. Banks are required to follow the new rules that are aimed at reducing the impact of potential failure of the parent banks. Most of these banks are of Indian and non-EU country origin. Earlier the Prudential Regulatory Authority (PRA) of the Bank of England had issued a consultation paper outlining the new rules and the consultation had ended in May and the new rules came into force from 5 September. The new rules affect branches of international banks and not subsidiaries. Bank of England has listed 145 branches of international banks operating in Britain, accounting for 31% (2.4 trillion pounds) of the total assets of the banking system. The five Indian banks which operate branches in the UK and cater mainly to the large Indian diaspora are Bank of Baroda, Bank of India, Export-Import Bank of India, Syndicate Bank and State Bank of India. Together, they hold millions of pounds in deposits. The four Indian banks who operate as ‘subsidiaries’ are Union Bank of India, Punjab National Bank, ICICI and Axis Bank. In order to continue functioning in the UK, Indian banks with branches will have to go through a lengthy overhaul of their legal structures into subsidiaries or deliver what is called “a very high level of assurance” from the bank regulator in India. For branches from outside the EU, the Bank of England said that the new regime focuses on three main factors: Whether the home state supervision of the firm is equivalent to that of the PRA; the branch’s UK activities such as whether they will undertake wholesale or retail banking activities; whether the PRA has assurance from the home supervisor over the firm’s resolution plan in a way that reduces the impact on financial stability in the UK.
