Brexit: Banks are asking for european license

7 years ago - Published in Finance, Fundamental Analysis

Daniele Nouy, head of supervision at the European Central Bank, said in Frankfurt on Tuesday that license applications from about 20 banks are in some stage of assessment by supervisors on the continent, Bloomberg reported. 
"Some have visited us several times to discuss their plans to move," said Daniele Nouy, who heads the ECB's banking supervision.
Updating eurozone finance ministers — currently meeting in Brussels — on the progress of discussions, Nouy said the banks wanted clarity on how they can retain access to the single market after Brexit. 

But Nouy voiced her concern that international banks were overly relying on "empty shell" subsidiaries to continue working in the bloc following Brexit. She warned banks against setting up branches in the EU in name only, while keeping most of their operations in London.
Under EU law, financial institutions wanting to offer services such as deposits and lending are required to have an independent subsidiary based in an EU country.

If it fails to negotiate a new relationship with the rest of Europe when it departs the EU in 17 months from now, Britain will lose its passporting rights to provide financial services within the bloc.

Several banks have publicly indicated that they plan to move hundreds or thousands of London-based employees to Frankfurt, Paris and Dublin, among other EU-based locations, in preparation for the UK's departure.

A number of Japanese lenders in particular and US investment bank Morgan Stanley have already confirmed their moves to the German financial capital. Others are waiting until early 2018 to see if a smoother Brexit can be agreed between Britain and the UK, after a multi-year transitional arrangement was mooted after negotiations looked likely to stall.
The potential exodus is not limited to financial services as some London-based law firms have also enquired about moving their headquarters to Dublin.

The U.K. could lose as many as 75,000 jobs in banking and insurance if it leaves the EU without a trade deal, according to Sam Woods, Britain’s top banking regulator. About 10,000 U.K.-based jobs are probably at risk on “day one” of Brexit, said Woods, chief executive officer of the Bank of England’s Prudential Regulation Authority.
It estimated that, in a worse-case scenario, British-based banks would lose 40-50 percent of total revenue from selling financial services to the EU.