FRANKFURT, Germany (AP) — A top banking supervisor says that British banks must put down solid roots if they want European banking licenses to keep access after the UK leaves the European Union.
Sabine Lautenschlaeger said Monday that banks seeking licenses in the EU post-Brexit would need "sufficient local staff and operational independence." European licensing authorities "will not accept empty shell companies," she said.
Banks currently can do business throughout the 28 EU countries by having a base in one of those states, an arrangement called "passporting." Banks that have their EU base in London — which includes British banks but also non-European ones — could lose access to the other 27 EU countries if Britain opts to break away from the bloc's single market.
EU financial centers such as Frankfurt, Dublin and Paris are competing for any banking business that might have to move.
British Prime Minister Theresa May has said she plans to submit official notice on Wednesday that her country intends to leave the European Union and its provisions for tariff-free trade and free movement of workers within its borders. That follows a referendum last June in which a majority voted to leave. The terms of Britain's departure will be the focus of talks during a two-year negotiating period following the handing over of May's letter to EU officials.
Lautenschlaeger said banking regulators were "prepared for any outcome of the negotiations, and banks should be too." She warned that EU banking officials would be cautious of banks shopping among jurisdictions looking for easier rules.
"As supervisors, we will not participate in a race to the bottom," she said.
She noted that banks could also seek access under an arrangement known as a "third-party branch," in which they would remain under national supervision. Some countries require local bank branches to have financial reserves to protect them against losses, while others don't. Lautenschlaeger said that could be changed during an upcoming review of EU banking legislation.
Lautenschlaeger is vice-chair of the European Central Bank's supervisory board overseeing banks at the EU level. The single supervisory mechanism was created to provide banking oversight at an EU level after national regulators were seen as too willing to overlook looming trouble at their home banks.
Troubles at banks in Britain, Europe and the United States were a major factor in triggering the global financial crisis in 2007-2009 and the subsequent recession. Governments have since moved to find ways to keep risky behavior and resulting losses at banks from constricting credit to businesses and saddling taxpayers with losses from bailouts.