UK banks need solid EU roots to access bloc: supervisor
Lloyd’s of London to choose Brussels or Luxembourg as EU hub
FRANKFURT, Germany, March 27, (Agencies): A top banking supervisor says that British banks must put down solid roots if they want European banking licenses to keep access after the UK leaves the European Union.
Sabine Lautenschlaeger said Monday that banks seeking licenses in the EU post-Brexit would need “sufficient local staff and operational independence.” European licensing authorities “will not accept empty shell companies,” she said.
Banks currently can do business throughout the 28 EU countries by having a base in one of those states, an arrangement called “passporting.” Banks that have their EU base in London — which includes British banks but also non-European ones — could lose access to the other 27 EU countries if Britain opts to break away from the bloc’s single market.
EU financial centers such as Frankfurt, Dublin and Paris are competing for any banking business that might have to move.
British Prime Minister Theresa May has said she plans to submit official notice on Wednesday that her country intends to leave the European Union and its provisions for tariff-free trade and free movement of workers within its borders. That follows a referendum last June in which a majority voted to leave. The terms of Britain’s departure will be the focus of talks during a two-year negotiating period following the handing over of May’s letter to EU officials.
Lautenschlaeger said banking regulators were “prepared for any outcome of the negotiations, and banks should be too.” She warned that EU banking officials would be cautious of banks shopping among jurisdictions looking for easier rules.
“As supervisors, we will not participate in a race to the bottom,” she said.
Meanwhile, Lloyd’s of London, the world’s largest speciality insurance market, will this week pick Brussels or Luxembourg for its planned European Union subsidiary, after Dublin had been an early favourite, sources say.
Lloyd’s has been one of London’s most vocal financial services firms about the need for an EU subsidiary if Britain has no access to the single market after leaving the bloc.
It will announce its choice on Wednesday after its council meets, a Lloyd’s spokesman said, the same day British Prime Minister Theresa May triggers Article 50 of the EU’s Lisbon Treaty.
Shortlist
Lloyd’s shortlist of six locations has been reduced to Brussels and Luxembourg, three sources said. Alongside Dublin’s removal, Frankfurt, Malta and Paris have also been dropped.
Lloyd’s could move dozens of staff to its subsidiary, rather than the hundreds some banks plan to shift, the sources said.
The choice by Lloyds could affect other insurers’ plans.
“As other larger insurers announce their decisions on this matter, it helps inform our choice — we are happy to benefit from their analysis,” said one insurance CEO.
Factors influencing the choice include tax, regulation, proximity to clients, as well as staff-related issues such as the presence of international schools and good restaurants, consultants say.
Lloyd’s insurer Beazley is turning its Dublin operations into an insurance subsidiary, while Hiscox is choosing between Luxembourg and Malta.
US insurer AIG chose Luxembourg for its EU hub this month.
Nicolas Mackel, head of Luxembourg’s financial development agency, said three to four insurers in addition to Lloyd’s were close to deciding a location, with Luxembourg among their choices.
Dublin said this month it had received five Brexit-related applications for authorisation by insurance or reinsurance firms and five more had signalled a firm intention to apply.
Dublin was initially seen as first choice for Lloyd’s and other UK-based insurers after the Brexit vote, helped by its proximity to Britain and use of English.
Ireland, the European hub for insurers Zurich and Metlife, identified insurance as an area where it could win new business.