Erscheinung:29.06.2018 Brexit - Conference: challenges and opportunities for financial firms in Germany
Booking models, contract continuity and the issue of where central counterparties are seated were the key topics addressed by a Brexit conference jointly hosted by the European Banking Institute (EBI) and BaFin on 8 June in Bonn.
The essentially positive approach was clear: the high-ranking international participants from academia, supervision and industry talked about challenges rather than problems – despite the large number of unresolved issues associated with the United Kingdom’s withdrawal from the EU.
BaFin’s solution-oriented stance
“The greatest challenge to any thinker is stating the problem in a way that will allow a solution,” Dr Peter Lutz, Head of Department at BaFin, quoted the British philosopher Bertrand Russell. This characterises BaFin’s approach to Brexit-related issues: it carefully analyses problems and then establishes a solution for them.
Definition:Cliff effects
Cliff effects are the consequences which the United Kingdom’s withdrawal from the EU would entail in the absence of an agreement covering the period following its withdrawal.
And considerable efforts are being made to avoid so-called “cliff effects”: from the markets’ infrastructure via continuity of contracts to market access and equivalence in areas such as regulation and data protection, Lutz remarked. BaFin aims to minimise the level of operational risk for the institutions directly affected by Brexit as well as for the financial markets as far as possible. Moreover, central issues relating to booking models, the risk-oriented development and expansion of a company’s internal structure and third-country branches which companies have repeatedly raised require consistent answers. However, BaFin must ensure above all that the German financial system continues to function and is stable and characterised by integrity. “That is not a trivial task!”
Avoidance of supervisory arbitrage
In BaFin’s view, Brexit should not be used for the purpose of supervisory arbitrage. It is closely cooperating with the European Banking Authority (EBA) and the Single Supervisory Mechanism (SSM) to avoid this.
The supervisory rules in Germany are transparent and BaFin teams of experts are available to assist institutions which are prepared to relocate, Lutz stated. Moreover, BaFin accepts development phases provided that the business unit clearly expands in Germany during this period. The approval procedures are under time pressure due to the Brexit deadline. BaFin is therefore willing to make temporary concessions as long as equal treatment for institutions and a level playing field are ensured.
At a glance:European Banking Institute
The European Banking Institute (EBI) is a joint venture established by European universities and supported by associations in the financial sector, with the legal structure of a registered association (eingetragener Verein – e. V.). The EBI is seated in Frankfurt am Main, Germany.
The institute has been created to develop a pan-European research centre for banking regulation and supervision. It sees itself as a partner of regulators, supervisors and the private sector which it supports through academic input in the fields of law, economics and accounting.
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