Otherwise they may find it’s too late to have their applications processed, Dombret said in an interview at Bloomberg’s London headquarters on Thursday. Stability is the priority for financial supervisors as the U.K. gets closer to leaving the EU, meaning that decisions on location have to be taken early, he said. There may be about 100 banks currently operating out of the U.K. that need EU licenses, he said.
“Eleventh-hour applications may not be processed in time,” said Dombret, who’s responsible for banking and financial supervision at the Bundesbank and is also a board member of the European Central Bank’s supervisory arm. “It’s better to apply early and change the application if things change, rather than wait to apply.” [...]
Equivalence “is not a concept I can apply” to a financial center as large as the U.K., Dombret said. The idea was conceived of to allow firms from smaller centers to operate in Europe, he said.
There has been “a steady decline in expectations of how deep the integration will be after Brexit,” Dombret said a speech to U.K. Finance, the British banking lobby group, on Thursday. “It quickly fell from remaining part of the single market and passporting to the approach of equivalence in supervisory regimes, on the basis of which access could have been granted.”
German banks should consolidate for economic issues including profitability, rather than to cut their administrative burden, Dombret said. “I don’t have an idea in my mind what the optimal size is of the banking industry in Germany,” he said. “The market should decide.” Profitability at the country’s banks is lagging, as is efficiency, he said.
In Germany’s crowded banking system, lenders with less than 3 billion euros ($3.7 billion) of assets make up 82 percent of institutions. While Dombret anticipates lenders buying each other domestically at first, he also expects to see some cross-border deals.
The Bundesbank official expressed concern about efforts to force London-based clearinghouses to relocate elsewhere in the EU, saying that their location is irrelevant so long as European supervisors maintain their powers in a post-Brexit U.K.
“Supervisory colleges give a very clear view of London’s clearinghouses,” and if EU authorities maintain their rights, location is not an issue, Dombret said. [...]