On 16 May 2018, the European Central Bank (ECB) published a newsletter article regarding how the transition period affects what ECB Banking Supervision expects from banks.
Key points in the article include:
- the precise content of the withdrawal agreement will not be known until late 2018. Uncertainty remains, including the risk that the agreement might not be ratified by all sides involved in the negotiations. The ECB expects banks to continue preparing for all possible contingencies;
- banks are responsible for taking the necessary steps to obtain all authorisations required for them to carry out their activities in a timely manner to make sure that they can continue to serve their customers after 30 March 2019;
- the ECB and EU27 national supervisors expect banks to come up with credible Brexit plans as soon as possible;
- for banks looking to relocate activities to the euro area the ECB and EU27 national supervisors expect to receive their authorisation applications as soon as possible but at the very latest by the end of Q2 2018;
- banks should not use a possible transition period to delay planning, but rather to implement their Brexit plans and adapt their operations to the new framework that would result from the UK becoming a third country; and
- the ECB has previously communicated its intent to provide flexibility to enable banks to meet certain supervisory expectations and build up their capabilities in the euro area. During this “build-up period”, which will be discussed on a case-by-case basis, the ECB and EU27 national supervisors may allow more time for banks to meet certain supervisory expectations regarding their local risk management capabilities and governance structures, and to move to an adequate and balanced business organisation within the euro area. The ECB and EU27 national supervisors will determine when banks should meet certain supervisory expectations and now much flexibility can be provided.