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03 December 2018

Financial Times: Regulator warns banks over Brexit moves out of City

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The UK’s financial regulator has urged a group of international banks in the City of London to limit the number of clients they move overseas as part of their Brexit preparations.

The Financial Conduct Authority wrote to the banks last week warning them to make “the minimum necessary changes” to where their clients are based. It said it was “prepared to intervene where we see steps being taken which could expose clients or markets to unacceptable execution risks”. 

In the letter, first reported by Financial News, the FCA added that it expected the banks to concentrate on “day one readiness” for Brexit and to limit disruption “to avoid harm to the clients they serve or markets in which they operate”. 

It added: “Clients should not be moved out of the UK until the FCA is satisfied that the relevant UK boards and/or senior managers have fully considered the impact of their firms’ proposals on every category of client, including whether their proposed changes are in each client’s best interests.”

One person at a Swiss bank said it had received similar inquiries from the regulator previously “asking about what client business we are planning to move away from the UK . . . which seems to be a focus from the FCA at the moment”.

They thought it was “more aimed at those without a subsidiary structure in the UK or on the continent already”.

One US bank said the Bank of England “is being very accommodating about us needing to move EU clients”.

As for non-EU clients, the FCA said the UK would have a post-Brexit regulatory framework that delivered “equivalent outcomes to the EU27” and so moving them out of the UK could expose them to differing contractual, insolvency and tax regimes. This could also spell “increased costs and risks to which they would otherwise not be exposed”, the watchdog added. 

“Where firms are looking to make changes . . . which may impact non-EU 27 clients, they should discuss those plans with us.” 

The letter was signed by Megan Butler, the FCA’s executive director for supervision.

The regulator said: “We have emphasised to firms that we expect decisions taken by them in relation to EU withdrawal to be consistent with our statutory objectives, which include the interests of their clients.” [...]

Full article on Financial Times (subscription required)

© Financial Times

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