21 October 2021

FT: ECB pushes banks to boost their post-Brexit operations

The European Central Bank is pushing banks to add hundreds of extra staff and billions of extra capital to their post-Brexit operations in continental Europe. One of the big surprises of Brexit was how few jobs moved from the City to the EU, with Financial Times research showing only a minimal reduction of London bank jobs in recent years against predictions that tens of thousands of jobs would have to relocate.

But bank executives, lawyers and supervisors all told the FT that the ECB is becoming increasingly forceful in its demands that lenders move more resources to the continent to run their European businesses in the aftermath of Brexit. The demands affect banks from across the world who have traditionally used London as their hub to provide key services to clients across the EU.

The fresh push is partly linked to the ECB’s recent decision to end temporary pandemic-era reprieves it granted banks on their timetable for moving staff and capital to the EU. One person familiar with the change said the ECB had been “realistic in light of the impediments to geographic moves, and granted extensions, but now that is over”.

Disparities in different banks’ approaches - and shortcomings in some - have been highlighted by an continuing “desk-mapping” review of the beefed-up continental offices that banks are using to serve their EU clients after Brexit. Bankers and lawyers also said the ECB was taking a tougher approach than expected to the long standing issue of the location of risk management staff overseeing EU trades, and how much capital the EU entities must have.

One executive said his bank would have to move hundreds more people than they expected because of the approach the ECB is taking to back-to-back models, which allow banks to offset EU trades with their London entities and effectively manage the risk from the UK. “We’re ramping up our European model enormously,” he said, adding that capital would also be increased as the ECB got “more directive”.

A director of the EU entity of another large bank said the ECB’s approach was “certainly stricter” than expected. “It’s not stricter than the letter of what was agreed, but there was a perception that, ‘surely they can’t mean that, surely they’ll see reason once we get underway’,” he said. “Turns out they did mean that, and they’re pretty good at enforcing it.”...

more at FT

© FT plc