Speaking in Frankfurt, Sabine Lautenschläger said banks could not be sure if transitional agreements would help smooth the exit process, reiterating that European regulators would “resist any supervisory race to the bottom”.
She added: “We do not care whether banks go to Dublin, Paris, Rome or Frankfurt. What we care about is that banks across the euro area are supervised according to the same standards.”
Ms Lautenschläger went on to warn banks that regulators will not accept “shell companies” or dummy banks booking exposures back-to-back with other entities.
She said: “Any bank that operates in the euro area must be a ‘real’ bank. And a ‘real’ bank has adequate local risk management, sufficient local staff and operational independence.”
Ms Lautenschläger urged any banks wishing to set up in the EU to apply for licences “as soon as possible” as the timetable is short.
The ECB is the eurozone’s banking supervisor but, under EU law, does not have direct responsibility for the divisions of banks that conduct most of their market trading – namely broker-dealers – despite these being some of the most complex and riskiest aspects of their businesses.
This is largely because when the ECB became responsible for eurozone supervision in 2014, the bulk of broker-dealers were in London and therefore not under its purview.
This means banks now looking to relocate these operations and, to continue to trade continental securities after Brexit, will have their businesses approved and supervised by the national markets regulator of whichever country they move to.
Countries hoping to lure banks to their financial centres after Brexit are offering differing regulatory standards, raising fears at the ECB that they could be subject to ‘light touch’ supervision – thereby undermining its aim of making financial regulation consistent across the bloc.
Such inconsistencies mean broker-dealers trading the same markets in Europe could be subject to different…