ECB plan to avoid “empty shells” after Brexit enters a new phase

He European Central Bank plans to deepen its scrutiny of whether the euro zone banking centers created in response to the Brexit They rely too much on London for services such as mergers and acquisitions and the issuance of shares and bonds.

Before Brexit, global banks had used London as their base in the European Union, but the departure of the United Kingdom forced them to open or increase their operations in the bloc, creating tensions between the ECB and the Bank of England over the transfers of staff.

Brexit has seen around 7,000 financial sector jobs move from London to the EU, increasing pressure on the UK to reform financial rules to keep the City competitive globally. .

The ECB, which supervises large banks located in the euro zone, made clear on Wednesday that its 2020 Desk Mapping Review (DMR), in which it checked whether these centers were “empty shells” that depend on services based in London, was not a one-time thing.

“Other Brexit-related activities that complement the DMR include (…) conducting a supervisory review of the remaining corporate and investment banking activities that were not covered by the DMR (mergers and acquisitions, income capital markets variable, debt capital markets, leveraged financing)”he claimed.

The ECB said it had identified 264 trading desks in its mapping exercise, representing 91 billion euros ($99 billion) of risk-weighted assets (RWAs), and 4 billion euros of net trading income.

It is now assessing feedback from Brexit centers on the review before setting out mandatory requirements on sufficient senior staffing, giving banks 18 months to meet them.

According to the ECB, the 56 trading desks “important” identified must be managed entirely locally from the EU or with “significantly strengthened local capacities.” The total number of high-level operators is expected to increase by 132 to 306.

source: Reuters