Banks relocating to the eurozone following the UK’s decision to exit the European Union (EU) will probably have to wait six months to secure a licence and the process could take up to a year, said the European Central Bank (ECB).
The eurozone banking supervisor published a document addressing banks’ Brexit-related queries, in which it confirmed that it typically takes six months to decide whether to grant a banking licence. That period may be shorter if a bank already operates in the eurozone and simply wants to extend its licence, the ECB added.
“In any event, a decision must be taken within 12 months of the date of the application,” the ECB document stated. “You should plan accordingly, in order to be sure to obtain your licence on time.”
Following prime minister Theresa May’s invocation of Article 50 two weeks ago to trigger the Brexit process, UK-based banks are under pressure to move quickly ahead of Britain’s expected departure from the EU by March 2019.
Many have already begun plans to transfer part of their operations into the eurozone to ensure they can continue to serve EU customers following the UK’s departure from the bloc. Frankfurt, Paris, Dublin, Amsterdam and Luxembourg are competing to attract their business.
Unless they move, UK-based banks risk losing their ability to provide services across the EU, depending on the terms of the trade deal concluded between Brussels and London.
The ECB said it was “completely neutral” regarding the eurozone location chosen by banks, but 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, it added.
In a concession to banks, the ECB said it would allow banks expanding or migrating from the UK to use internal risk models that it hadn’t yet approved, for a limited period. However, those models must be approved by the UK supervisory authority, and banks would still need to apply to the ECB for its approval.
The ECB is to host a technical workshop for banks on May 4 in Frankfurt, to further clarify what is expected of them by eurozone authorities.
ExxonMobil is legally challenging a $2m fine from the US Treasury for allegedly violating sanctions against Russia in 2014 while US Secretary of State Rex Tillerson was still overseeing the company.
Morgan Stanley is moving staff to Frankfurt in time for the March 2019 Brexit deadline.
The US bank, which already has 350 employees based in the city, will transfer some trading activities currently undertaken in London and create a further 150 to 250 jobs according to reports.
BNP Paribas is the latest in a long line of financial service companies to be penalised for misconduct during the financial crisis on both sides of the Atlantic.