ANNOUNCED AS TEMPORARYNo
FDI: Treatment and operations, nes
On 1 December 2009, the Financial Services Authority (FSA) has significantly increased control over overseas banks that want to take deposits in the UK.
This step aims to force overseas banks to open local subsidiaries with their own capital and liquidity, but not local branches with capital and liquidity held by the overseas bank. In this way the FSA hopes to protect the interests of residents of the UK in cases of bankruptcies of the main branches. For example, laws in the USA and Canada give priority to local (American or Canadian) depositors over depositors from other countries in cases of bankruptcy. In contrast, a subsidiary would continue operations using its own liquidity in such event. Also, local subsidiaries are exposed to a greater degree of control by the FSA than branches of international banks.
In many cases operating through a subsidiary is more expensive. Therefore, this policy provides an unfair advantage for local banks over their foreign competitors, and hence is rated as protectionist according to Global Trade Alert rules.
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