The United Kingdom's planned exit from the European Union (EU) is already casting shadows on the financial sector. As a result of Brexit, undertakings domiciled in the UK are expected to lose their European passporting rights, which would also affect a large number of subsidiaries of major non-European banks.

Currently, the European Passport still allows undertakings under UK supervision to conduct banking business and provide other financial services in other member states of the European Economic Area (EEA) as well. Since they want to continue using these passporting rights after Brexit, many of these undertakings are considering relocating to Germany.

BaFin has already held many discussions with such undertakings. It again organised workshops during 2017 for foreign banks and financial services institutions, for funds and their management companies and for foreign issuers of securities to debate supervisory issues. The workshop agendas included issues such as authorisation procedures, compliance, risk management, outsourcing, internal models, rules for large exposures, recovery planning, marketing notification procedures for funds from third countries as well as the consequences of Brexit for prospectuses. The general feedback from participants was that they had found these events helpful. Furthermore, BaFin has dedicated teams that can be contacted for answers to the wide range of related questions.

Clarity and a reliable framework

"In a period of transition, supervisors and regulators will need to find novel solutions to ensure a flexible transition into the post-Brexit world ", said BaFin President Felix Hufeld. The institutions affected would need reliable transitional arrangements that should not, however, become models for eternity, explained Hufeld. Arrangements that could be tolerated at the start, for instance to avoid cliff effects, would need to be brought into an appropriate balance in the long term. Until that balance was achieved, Hufeld continued, BaFin’s aim was to rise to the challenges of the numerous developments in its supervisory practice.
BaFin's aim is to ensure the stability of the German financial market and at the same time offer the undertakings affected by Brexit clarity and support, as well as a reliable framework that allows them to conduct banking business and provide financial services in the EEA, even under the new political conditions. BaFin's President emphasised the importance of ensuring that companies across the EEA are supervised and regulated according to the same standards.