Articulate in Frankfurt, Sabine Lautenschläger said banks could not be sure if transitional concordats would help smooth the exit process, reiterating that European regulators leave “resist any supervisory race to the bottom”.
She added: “We do not care whether banks go to Dublin, Paris, Rome or Frankfurt. What we distress about is that banks across the euro area are supervised agreeing to the same standards.”
Ms Lautenschläger went on to warn banks that regulators when one pleases not accept “shell companies” or dummy banks booking exposures back-to-back with other real natures.
She said: “Any bank that operates in the euro area must be a ‘legitimate’ bank. And a ‘real’ bank has adequate local risk management, enough local staff and operational independence.”
Ms Lautenschläger urged any banks caring to set up in the EU to apply for licences “as soon as possible” as the timetable is short.
Sabine Lautenschläger has forewarned banks to ‘prepare for the worst’
The ECB is the eurozone’s banking supervisor but, directed EU law, does not have direct responsibility for the divisions of banks that running most of their market trading – namely broker-dealers – despite these being some of the most complex and riskiest sides of their businesses.
This is largely because when the ECB became principal for eurozone supervision in 2014, the bulk of broker-dealers were in London and wherefore not under its purview.
This means banks now looking to relocate these tasks and, to continue to trade continental securities after Brexit, will be experiencing their businesses approved and supervised by the national markets regulator of whichever surroundings they move to.
The European Banking Authority will be artificial to move from London after Brexit
Any bank that runs in the euro area must be a ‘real’ bank.
Mountains hoping to lure banks to their financial centres after Brexit are present differing regulatory standards, raising fears at the ECB that they could be voter to ‘light touch’ supervision – thereby undermining its aim of making financial required consistent across the bloc.
Such inconsistencies mean broker-dealers mercantilism the same markets in Europe could be subject to different regulatory musts and raise the prospect that some would take on more jeopardizes than other regulators would deem appropriate.
Across the eurozone, the allied ti of Frankfurt, Dublin, Luxembourg and Madrid are vying to lure banks with the aspire of benefitting handsomely from the tax revenues and jobs they would make known and regulation is one way to differentiate themselves.
One area in focus is the extent to which civil regulators will allow broker-dealers to conduct ‘back-to-back’ trading.
This is where a bank inclination conduct trades – such as buying European securities – out of its EU base but organize and risk manage the transactions at its London office.
This would minimise the several of people a bank would have to move to Europe after Brexit as much of the occupation and risk could continue to be overseen in London.
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But it would mean regulators in that country and the wider euro zone transfer not have supervisory control over the people and units conducting the merchandise and managing the risks, with minimal amounts of capital held locally at the EU segment.
In March, Ms Lautenschläger expressed her concerns on this very issue when she give the word delivered there could potentially be changes to EU laws to bring broker-dealers down the ECB’s supervision.
She said: ”Needless to say that I would certainly not accept banks ticket all exposures with the euro area entity while having their danger management and internal control systems outside the euro area.”