On Thursday 12 October, the European Banking Authority (EBA) issued a series of recommendations to the national authorities, aiming to ensure a constant and consistent application of European financial legislation throughout the period leading up to Brexit, a period that will be characterised in particular by the departure of financial entities from the United Kingdom to the EU.
“The opinion aims at providing greater certainty to firms and ultimately at ensuring a level playing field” within the single market, the EBA states in a press release. Many areas governed by European texts are concerned, such as the accreditation mechanisms, access to equivalents for the provision of investment services, prudential supervision, outsourcing responsibilities, resolution and the guarantee of bank deposits.
Irrespective of the individual regulatory provisions, the EBA's position is based on three key principles: - guaranteeing a consistent application of European legislation in order to avoid regulatory competition; - ensuring that financial entities are not faced with an excessive administrative burden; - promoting cooperation between competent national authorities.
In the event of a company relocating to the territory of a member state, accreditation applications must contain sufficient information on the structure and governance of the relocated financial entities, with full reasons given for the choice of these structures, in order to avoid any 'empty shells'. Within Banking Union in the Eurozone, in particular, the ECB will become the supervisor of investment companies of systemic importance and those that are exposed to the same risks as banks.
As regards resolution, Brexit must be built into the specific plans being prepared by the European banks, in line with the 'BRRD' directive. The financial institutions must evaluate their stocks and securities issuance plans that can be mobilised in the event of a bail-in, taking account of the fact that most of these instruments are issued under English law.
Furthermore, the national deposit guarantee schemes must ensure that depositors present in the EU of 27 maintain their protection following Brexit. In particular, the EBA has called on the national authorities to agree with their British opposite number to identify the national regime that will be responsible for protecting deposits located in branches of EU banks established in the United Kingdom. In this regard, it stands ready to act as a “central point of contact” between the parties, adding that it is crucial that depositors are kept informed at all times.
The report is available at: http://bit.ly/2yT4X3A. (Original version in French by Mathieu Bion)