The new financial regulations that the UK is planning could make it tough for Indian banks to operate there. The Bank of England’s Prudential Regulatory Authority had issued a consultation paper recently, which envisages that banks from outside the European Economic Area should offer only minimal retail services. Such a proposal, when implemented, will directly impact the operations of banks like State Bank of India, Bank of India and Bank of Baroda, which operate larger deposit taking retail services across Britain. The paper said the new supervisory approach is expected to require some branches to either exit the market or become a subsidiary. However, the new rules also leave the door open to a more relaxed and trust-based relationship with supervisors in such countries as the US and China in the realm of international wholesale banking. Although the regulatory authority did not single out any country by name, it sketches out the conditions that would govern London’s attempts to become a hub for trading the Chinese renminbi. A key element of the government’s strategy is to encourage Chinese banks to set up branches in London. India will have to offer a ‘very high level of assurance’ about its crisis management plans to be able to continue retail operations in the UK under the new regime. Alternatively, they can convert their UK branches into subsidiaries, which are subject to more complex clearances.
