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EBA comments on Brexit preparations in the banking sector

Updated: Mar 15, 2019

EBA strongly criticises the sometimes inadequate precautions in the event of a hard brexit.

The EBA published a statement on the preparations of the banking sector for the Brexit, analogous to the other European supervisory authorities for the insurance and securities sectors, on 25 June 2018.

EBA has strongly criticised the current arrangements of some institutions with regard to the threat of a hard brexit and calls for immediate improvements. It expressly points out that the institutions cannot rely on a political or public law solution and thus on ratification of the withdrawal agreement. Institutes in the EU and UK must secure themselves and take appropriate precautions in the event of a hard brexit in March 2019 without a corresponding agreement. In this respect, reviews of EBA have shown that the preparations made so far are insufficient and that no further delays should occur due to the time criticality. It expressly points out that appropriate preparations must be made, irrespective of the costs incurred. The recommendations made by the EBA in the opinion therefore relate to two major areas:

  • risk assessment and preparation and

  • customer communication.

Regulatory authorities and institutions are encouraged to identify and assess potential risks arising from Britain's withdrawal from the EU. In particular, financial commitments and contracts of European institutions in Great Britain and British institutions in Europe must be examined. When assessing emerging risks, regulatory aspects such as changes in risk weightings or higher capital requirements for certain positions need to be considered. EBA also draws attention to the need for operating licences both in the UK and within the EU as long as institutions wish to continue to operate in both markets.

The EBA also calls for timely and transparent communication of institutions with its customers. By the end of 2018, customers whose contracts are affected by Brexit must be informed with clear information about the corresponding effects, the measures taken and the resulting consumer rights. EBA requires institutions to take all necessary measures to meet their contractual obligations.

EBA announces that it will monitor further preparations for the Brexit and reserves the right to take further measures if it continues to consider the institutions' arrangements inadequate.

The experts of RFC Professionals have successfully accompanied change processes at institutes for many years. RFC Professionals would be pleased to support you in identifying and evaluating the effects of Brexit and the resulting need for adaptation.