F.For the banks and the institutions active in the financial market, the UK’s exit from the EU is still far from being ticked off. Rather, it feels like a hard Brexit, said Andreas Krautscheid, Managing Director of the Association of German Banks (BdB), at the annual conference call to journalists. Although the future economic and trade relations between the EU and Great Britain were contractually regulated shortly before the Brexit that took place at the turn of the year, the financial sector of all things was left out.
The financial center of London plays an outstanding role for banks, including those based in continental Europe. For example, London is the most important location for Deutsche Bank after its headquarters in Frankfurt, because this is where the investment bankers who are crucial for earnings are at home.
So it is not surprising when BdB General Manager Krautscheid calls for the most generous possible solution in favor of London in the negotiations that are now beginning for an agreement on financial services. After all, Deutsche Bank is the most important contributor to the banking association, and its CEO Christian Sewing will take over the office of bank president from Hans-Walter Peters on April 19 on Bank Day.
Krautscheid spoke out in favor of a large number of equivalence solutions. This means that the British regulations are recognized as being equivalent to the continental European ones. This means that London-based institutes can continue to offer their services in the EU. But there are concerns that Great Britain wants to strengthen its financial center and therefore introduce more generous supervisory rules. The financial center of London contributes around 7 percent to Great Britain’s annual economic output. In addition, the principle of equivalence is not comparable to the EU passports that were valid before Brexit. Because these related to significantly more products. The equivalence rules can also be canceled by the EU Commission at any time, especially if London relaxes the reins on banks.
“The British supervision is not a dumping supervision,” said Krautscheid. But the latest statements by the Governor of the Bank of England, Andrew Bailey, suggest that impatience is growing in London too. It is better to forego full access to the EU market after Brexit than to be degraded to the “rule taker”, he said (FAZ of January 8). According to Bailey, Great Britain has already made 17 equivalence decisions for institutions from the EU, while conversely it is not even a handful of a total of 40 topics.
Krautscheid fears that many shops and services could become more expensive if there is no solution in favor of the broadest possible market access. The EU stock exchange and securities regulator Esma is also tightening the reins. It has now warned the banks and fund managers not to use tricks to circumvent the new requirements that will apply after Brexit.