Navigating multi-jurisdictional financial structures in the EU regulatory environment

Executive Summary

European financial services groups face unique structural complexity when operating across multiple EU member states. Post-Brexit regulatory divergence, evolving supervisory expectations, and capital efficiency requirements necessitate sophisticated institutional architecture design.

This article examines key considerations for financial institutions structuring cross-border operations in the European Union, focusing on regulatory frameworks, supervisory coordination, and structural optimisation strategies.

Regulatory landscape evolution

The European regulatory environment for financial services continues to evolve, with Brexit representing a watershed moment in cross-border operations. UK-domiciled financial institutions previously benefiting from EU passporting rights have restructured significantly, establishing EU subsidiaries and reallocating functions across member states.

Simultaneously, regulatory authorities including the ECB, national competent authorities, and ESMA have intensified supervisory expectations around substance requirements, booking models, and risk management frameworks. These developments require institutions to maintain sophisticated compliance architectures across multiple jurisdictions.

Structural considerations

European financial groups typically employ hub-and-spoke models, with holding companies in favorable jurisdictions coordinating subsidiary networks across member states. Luxembourg, Ireland, and the Netherlands remain popular domiciles for EU holding structures due to established regulatory frameworks and favorable treaty networks.

Key structural decisions include:

• • Holding company domicile - Jurisdictional selection based on regulatory environment, tax treaties, and supervisory approach
• • Branch vs subsidiary strategy - Balancing capital efficiency with local regulatory requirements and market access considerations
• • Functional allocation - Determining location of treasury, risk, compliance, and other centralized functions
• • Booking model architecture - Designing transaction booking flows that satisfy substance requirements while optimizing capital

Supervisory coordination

Multi-jurisdictional financial groups must navigate complex supervisory frameworks involving home and host regulators. The Single Supervisory Mechanism (SSM) provides coordination for significant institutions under ECB supervision, yet national competent authorities retain substantial influence over local operations.

Effective structural design considers supervisory colleges, resolution planning requirements, and recovery frameworks. Institutions must demonstrate resolvability while maintaining operational cohesion across the group.

Practical implementation

Structural optimisation for European financial groups requires phased implementation with careful attention to regulatory approval processes, operational continuity, and stakeholder management. Major restructuring initiatives typically span 18-36 months from initial planning through full implementation.

Critical success factors include early engagement with supervisory authorities, robust project governance, and coordination across legal, tax, regulatory, and operational workstreams. Institutions must balance strategic ambition with practical execution constraints.

Conclusion

Multi-jurisdictional financial structures in the EU require sophisticated design balancing regulatory compliance, capital efficiency, and operational effectiveness. As the regulatory landscape continues evolving, financial institutions must maintain structural agility while meeting heightened supervisory expectations. Strategic structural planning represents a core institutional capability for European financial services groups navigating cross-border complexity.