EU watchdog tells banks to speed up 'inadequate' Brexit preparations
* EU watchdog says no miracle public help on the way
* ECB repeats end of June deadline for licences
* Bank of England declines to comment
(Adds TheCityUK comment)
By Huw Jones
LONDON, June 25 (Reuters) - Banks have failed to make enough
progress in their Brexit preparations and should not expect
"miracle" public intervention to help them, the European Union's
banking watchdog said on Monday.
While Britain and the EU have agreed in principle on a
transition deal lasting from Brexit next March to the end of
2020, it is part of a broader divorce settlement that has yet to
be formally adopted.
Banks' preparations for the potential departure of Britain
from the EU without a ratified withdrawal agreement are
"inadequate", the European Banking Authority (EBA) said in a
statement on Brexit.
"This should be a wake up call. Time is running out, in some
cases it has run out, and don't assume there will be a
transition period," said Piers Haben, EBA director of banking
markets, innovation and consumers.
Banks in Britain are submitting applications for licences to
set up or expand operations in the EU to ensure continuity of
service after March. UK branches of banks from the EU need
permission to continue serving customers in the United Kingdom.
"Big banks can't assume they can put off the full
application process," Haben said.
The EBA said banks must have enough staff at new operations
to manage risks from the first day after Britain's withdrawal on
March 29, 2019, and financial stability must not be put at risk
because lenders want to avoid costs.
The EBA - itself relocating from London to Paris by March
due to Brexit - said preparations by banks must advance more
rapidly in a number of areas without further delay.
Separately, the European Central Bank (ECB) said banks must
submit "complete and high quality" licence applications for euro
zone hubs by the end of this month to ensure there is no
disruption in business with EU customers after Brexit Day.
"For banks that fail to meet the Q2 2018 target date, or
fail to submit high-quality applications, the ECB cannot
guarantee that the authorisation process will be completed by
the end of March 2019," the ECB said in an update on its Brexit
policy on Monday.
The Bank of England (BoE), which has said banks can rely on
the transition deal being in place by March to avoid hasty
relocation decisions, had no comment on the EBA's statement.
It has said branches of EU banks in London can assume they
will not need new UK authorisation until the transition period
NO MIRACLE COMING
Lenders in Britain and the EU should quantify exposures to
counterparties in each other's jurisdictions, including the
billions of euros in cross-border derivatives contracts, the EBA
The BoE has said UK and EU legislation is needed to ensure
continuity in contracts that span many years in some cases. The
EU has shown no willingness to legislate, and the EBA said no
public solution may be proposed or even agreed in time.
The ECB and BoE are in talks on how to keep markets orderly
around Brexit Day next March, raising expectations that some
public action will take place.
"There is widespread perception there will be a public
policy miracle. I don't think banks can rely on a general,
catch-all public intervention," Haben said.
TheCityUK, which promotes Britain as a financial centre,
said the single most helpful thing EU authorities could do right
now was to engage urgently on the issue of contract continuity.
The EBA sets out a "sequence" of tasks banks must complete.
It has said banks should explain to regulators how they will
continue to swap data between units in Britain and the EU
without falling foul of data protection rules.
EU-based banks will also have to explain if any bonds they
have issued under UK law remain valid after Brexit for plugging
capital shortfalls in a crisis.
Continental banks must also show how they could meet
potentially higher capital charges for exposures to UK assets no
longer deemed to be covered under EU law.
The EBA also wants details about where and how banks will
book and manage risks from market transactions after Brexit.
Banks must tell customers in clear language what they can expect
to happen next March.
(Reporting by Huw Jones; Editing by Mark Potter and Jane
First Published: 2018-06-25 10:00:00
Updated 2018-06-25 17:43:38
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