Banking watchdog in Europe warns banks time is running out on Brexit plans

The European banking watchdog has warned banks that they need to apply for EU banking licenses before the end of June, in advance anticipation of Brexit becoming a reality. The ECB’s single supervisory mechanism SSM has in fact set a final dead line for the UK banks to apply for and secure bank licenses to continue to operate inside the European Union.

The top bank watchdog of the Eurozone has said that banks and other lenders must hasten their Brexit plans, and has warned there could be less than 5 months left for them to acquire the correct licenses to carry on operating inside the EU.

This aptly shows the concern the SSM has about the upcoming Brexit disruptions even though the UK and EU are trying to negotiate a transition that could run through into 2020.

The vice president of the SSM Sabine Lautenschlager said “ any of the banks that are wanting to move from the UK to the EU area should have submitted a license application already, and if they have not yet done so, this must be submitted by the second quarter of 2018 at the very latest”

The SSM operates as an arm of the ECB (European Central Bank) in Frankfurt and is presently in talks with over fifty banks regarding their plans for Brexit. Some of the larger USA and Eastern banks have stated that they are planning to shrink their UK operations and instead expand more into EU centric cities like Paris, Dublin and Frankfurt. However some pre forecasts shows that the idea of many thousands of jobs moving from London or the UK has yet to happen.

A significant factor in the potential impact of Brexit is the ‘passport’ rights of the banks that are based in the UK, who can presently sell services freely in the member bloc, but which the EU commissions has said will not be possible when Britain actually does exit the single market.

Hence, the EK and EU bloc counties are looking to urgently agree the terms of the transmission next month, as a block to the UK on certain aspects of their operations , could be deemed as ‘sour grapes’ by the EU and have a negative impact on bloc members also as a knock on effect. A failure to reach an agreement could potentially lead to a cliff edge Brexit if banks lose their passporting rights on the day the exit is penned in for, March 29^th 2019.

The SSM spokesman said that 8 UK based banks have already begun formal proceedings to obtain the new license that will be required and at least 4 others are planning to expand their operations a lot in the currency arena. The SSM said that the banks not be complacent and count on the ECB extending their deadline for applications . There is a potential for this though they hinted, for example they could be granted more time to actually implement their relocation plans. This would only apply to Banks that have already submitted credible and thorough plans for relocation though.

The SSM vice president stated that banks who are already in the EU zone should “prepare” for Brexit as well by submitting their applications to operate within the UK to the BOE’s supervising body ,the PRA (Prudential Regulation authority)

Michael Barnier the EU commissions chief Brexit negotiator briefed banking chiefs on the current state of the negotaions, and said it was discussed about the “preparedness” of market members.

He said that due to the uncertainty and wishy washy nature of a potential transition deal, that Banks should prepare for a potential Hard Brexit. Others have said , like David Davis , that they are confident of a transition deal by March.

In new talks, the head of the SSM Daniele Nouy said that banks must repair their balance sheets and reduce their non performing loans. The good times are now, he said. To carry over the problems of the crisis to the next down market is not a good option.

The current amount of bad loans has in fact dropped but non performing loans still stand at a huge £760 billion. Ms Nouy stated that there would be new guidelines introduced to deal with loans gone sour but this would be delayed until April 01 at least, if not later.