Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Banks Moving to EU Post-Brexit Could Need a Year to Get License, ECB Says

Posted by hkarner - 12. April 2017

Date: 12-04-2017
Source: The Wall Street Journal

Central bank says establishing a shell company in the eurozone wouldn’t be acceptable

London’s Canary Wharf financial district could see some of its residents moving their headquarters to the EU after Brexit.

FRANKFURT—Banks relocating to the eurozone as a result of Brexit will probably have to wait six months to secure a license, and the process could take up to a year, the European Central Bank said.

The comments, from the eurozone’s top banking supervisor, underline the pressure on U.K.-based banks to move quickly ahead of Britain’s expected departure from the European Union by March 2019.

In a document published Tuesday to address banks’ Brexit-related queries, the ECB said it usually takes six months to decide whether to grant a banking license. That period may be shorter if a bank already operates in the eurozone and simply wants to extend its license, the supervisor said.

“In any event, a decision must be taken within 12 months of the date of the application,” the ECB said. “You should plan accordingly, in order to be sure to obtain your license on time.”

Dozens of banks in the U.K. are expected to consider moving part of their operations into the eurozone to ensure they can continue to serve EU customers following Britain’s departure from the bloc. Likely beneficiaries include Frankfurt, Paris, Dublin and Luxembourg.

Unless they move, U.K.-based banks risk losing their ability to provide services across the EU, depending on the final trade deal hashed out between Brussels and London.

The ECB said it was “completely neutral” regarding the eurozone location chosen by banks. But it stressed that any new banking operation should be substantial, with adequate local governance and risk management, and that it “should have control over the balance sheet and all exposures.”

“Establishing an ‘empty shell’ company would not be acceptable,” the supervisor said.

In a concession to banks, the ECB said it would allow banks expanding or migrating from the U.K. to use internal risk models that it hadn’t yet approved, for a limited period. But those models must have been approved by the U.K. supervisory authority, and banks would still need to apply to the ECB for the models’ approval.

The ECB said it would hold a technical workshop for banks on May 4 in Frankfurt, to provide further information on what is expected of them by eurozone authorities.

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