PARIS: Fewer than ten of the approximately 40 banks that conduct EU business out of London have applied so far for a licence to continue banking in the bloc after Britain leaves, regulatory sources told Reuters.
The slow pace of applications is raising concern at the European Central Bank, the EU’s top banking supervisor, that some lenders are not doing enough to prepare for Brexit, or may even avoid its watch through a gap in the rules.
The past two months have seen a pick-up in the number of banks saying they plan to set up new EU subsidiaries after Brexit, with most major US, British and Japanese banks saying they will establish units in Frankfurt or Dublin.
But supervisory sources say they have still seen few formal applications for licences.
“We’re having lots of meetings but not enough concrete action,” one supervisor said.
While Britain does not leave the EU until March 2019, bank executives have said time is already running out: it could take 18 months or more to set up a new subsidiary, given the need to relocate staff, get the requisite technology and change contractual arrangements with EU clients.
The location of investment banks’ European headquarters is a major issue during Britain’s negotiations to leave the EU. Companies across the bloc depend for financing on global banks whose European arms are now mainly based in London. The Bank of England estimates that half of all the debt and equity issued in the EU involves financial institutions in Britain.
Big banks have warned that a “hard Brexit” could trigger financial instability if they were to suddenly lose access to EU markets. Europe’s banking industry group has said central banks would need to be ready to inject cash into financial markets to help keep them stable.
The application for a banking licence, to an EU member state’s national regulator and to the ECB, can take 6-12 months, and possibly longer if many banks apply at the same time. Three sources at different EU banking watchdogs say the total number of banks that have submitted applications so far was still in single digits.