ECB on Brexit: prepare for abrupt end to the UK’s access to the EU single market

The ECB recently published a press release about its expectations regarding risks for banks associated with the Brexit negotiations.

"Core capabilities need to be located in the euro area from day one (30 March 2019)."

According to the ECB, a smaller number of banks with limited activities in the EU have not yet submitted their Brexit plans to the ECB and other banks have not yet made their final decisions. ECB stated, that they lack detailed plans about their future set-up in the euro area, or have not shown sufficient progress in their relocation activities. This approach raises concerns ate ECB as time is limited and the uncertainty over reaching a final political agreement remains. In the possible absence of a Withdrawal Agreement ratified on time by both parties, banks should be prepared for all contingencies, including the possibility of there being no transition period but rather an abrupt end to the UK’s access to the EU single market.

ECB explicitly mentions steps to be done, those are

• the relocation and recruitment of key staff;

• the on-boarding of clients, including the amendment or replacement of contracts;

• and the establishment of infrastructure such as information technology, financial market infrastructure access, and real estate.

Banks should not expect public sector solutions to help them with the challenges they are facing. As communicated by ECB before, banks may use a limited and clearly defined build-up period to meet certain supervisory expectations if this has been previously agreed with the ECB and national supervisors. However, this does not affect the requirement that core capabilities need to be located in the euro area from day one (30 March 2019) and that the build-up to the target operating model needs to be finalised in good time, consistent with supervisory expectations.Read full press release here.