New EU cross-border banking rules could force US and UK banks to shift assets and staff from London to the EU, senior financial figures have warned. The Capital Requirements Directive VI, coming into force next year, will restrict non-EU banks from providing core services like lending and cash management to EU clients from outside the bloc.

UK Chancellor Rachel Reeves is monitoring the directive's impact, while TheCityUK warns it could undermine European defense spending efforts. The rules follow the EU's 2024 directive approval and arrive at a crucial moment for UK-EU relations, as Prime Minister Sir Keir Starmer seeks to reverse Brexit's economic effects through closer cooperation.

Financial executives say the directive could force banks to either move operations to the EU or prove case-by-case exemptions. The example of Booking.com, which relies on foreign banks for transactions in 80 currencies, illustrates the potential disruption. With UK-EU relations already strained by other trade barriers, including the EU's "Made in Europe" plan, the banking rules add another challenge to Starmer's ambitions for renewed partnership.