The European Central Bank (ECB) has published an interview with Sabine Lautenschlager, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB. In her interview there is a discussion about developments in the preparatory work of banks and supervision in light of the UK leaving the European Union.
The key message in the interview is that the ECB considers that for both small and large banks the “clock is ticking”. Ms Lautenschlager states that as no one knows yet how Brexit will play out but all affected banks should prepare themselves with a hard Brexit in mind. Ms Lautenschlager adds that “the banks are not as far advanced as we would like them to be.”
Ms Lautenschlager also explains that the ECB is striving to ensure that euro area banks are being proactive and well prepared. The ECB is in discussions with all euro area banks under its supervision that will be affected by the UK’s withdrawal, and is following the progress of their preparations.
In relation to the ECB’s work containing the risk of national supervisors “competing” for bank business Ms Lautenschlager makes the following points:
- the ECB will oppose any race to the bottom in supervisory standards; and
- the ECB is not just responsible for directly supervising the largest banks, but also for ensuring consistent supervision and a level playing field for all banks in the euro area – no matter which Member State they operate in.
Ms Lautenschlager discusses some of the policy issues that ECB supervisors are currently working on including recovery planning. Among other things Ms Lautenschlager mentions that institutions that move to the euro area need to present a complete recovery plan shortly after they have established themselves. Banks that are already in the euro area will need to update their plans to reflect the changed environment and group structure.
When discussing how the ECB will prevent the creation of “empty shells” in the euro area Ms Lautenschlager states that: “We need to remember that the ECB is fully in charge when it comes to granting licences to all banks in the euro area, regardless of their size. We work closely with the national supervisors and thoroughly assess banks’ applications together with them, but to ensure consistency in the euro area the final decision rests with the ECB. During the process we review banks’ risk management and governance frameworks, for example, and will insist that they have adequate capabilities in place.”
In April, the ECB published FAQs for banks considering relocating to the euro area. Our blog entry is here.
View Preparing for Brexit: “The clock is ticking”, 16 August 2017