The European Union’s continuing members have adopted a variety of strategies to strip soon-to-be-former member Britain’s financial-services industry bare for their own benefit. The French have promised to be a little less French about things while also relying on their famous Gallic luck. The Germans have promised to be just as German as ever in their efforts to lure Londoners to Frankfurt. The Irish, uh, sent a pot of four-leaf clovers and a rasher of bacon to Brian Moynihan.
One thing those countries and the likes of Luxembourg and Slovenia will not be doing is going all Cayman Islands in a regulatory race to the bottom, at least if the European Commission and European Central Bank have anything to say about it. Which they do.
On Monday the ECB said it would pay “special attention” to banks’ Brexit plans to ensure they don’t just set up shell companies in the euro area. Bankers want to keep as much as possible in London after Brexit to avoid having to create duplicate offices in Europe. But ECB officials want guarantees that the new European hubs are well capitalized and have compliance staff onsite….
If the commission proposal is approved, the definition of “credit institutions” supervised by the ECB may have to be enlarged to include the investment banks, which don’t take deposits and lend like regular banks, according to an opinion issued by the ECB last month….
The ECB has already taken a hard line, demanding that banks move substantial numbers of staff and capital into their European hubs. It has also been less inclined than local regulators to let banks flip risk back into their London entities in the years right after Brexit, a move that would reduce the amount of capital they have to shift into their EU offices.