Thu. Oct 17th, 2019

Planet Compliance

Innovation & Regulation in Finance

The Battle for Life after Brexit – European Capitals Court Foreign Companies

5 min read
A new sun rises

Just a few weeks ago the German financial regulator, BaFin, launched a new information portal on its website in its bid to attract foreign financial companies hit by Brexit. It’s just one example how European jurisdictions have moved to convince financial institutions to move their operations across the channel following the UK’s decision to leave the EU.

It’s certainly an interesting move as now regulators openly enter the arena. In the statement on the event of the launch, the German watchdog announced that “although the backdrop for this is Brexit, the United Kingdom’s planned departure from the EU, the welcome page is nonetheless aimed at all foreign companies wishing to conduct operations requiring supervision in Germany or considering moving their registered office here.” While not all relevant information is available in English yet, BaFin promises that it will continue to work on translations and that all communication with the regulator can be conducted in English. It also confirmed that it will simplify and accelerate approval procedures wherever possible. In order to accommodate companies, it will also draw on assessments by other European supervisory authorities and, where appropriate, use them as the basis for issuing temporary provisional authorisations. The dedicated area contains information regarding procedures, internal risk models, outsourcing, and securities prospectuses. It also contains information regarding the process to obtain authorisation and permission to provide financial services or offer securities and other investment products. It’s the German regulators’s next step in an initiative that saw it recently hold a workshop for several banks to present them with guidelines to move their operations to Germany after Brexit.The regulator underscored that it tries to accommodate banks needs as much as possible and made it clear that companies can make use of extensive outsourcing possibilities, which fulfil BaFin’s supervisory requirements, providing financial institutions with an easier road in. At the same time it warned firms though that BaFin does not accept mere “letterbox” arrangements.

The full BaFin statement with related information can be found here. It remains to be seen though how the German efforts compare to those of other European financial centres that equally try to lure business to their countries. In the past, the German regulator had been critised for not taking a similar approach towards innovation like the FCA, for instance, for FinTech firms, though the regulator highlighted that its regulatory mandate differs from those of others that it has no mandate to promote innovation in the same manner (for more information on the subject, read our article on the German approach here).

Where next for European Start-Ups?

The criticised approach is only one argument that puts BaFin’s efforts into question. Another is the competition from other jurisdictions. The French presidential hopeful Emmanuel Macron very publicly made its case for France as the future home of bankers and professionals right outside Downing Street at the occasion of a recent visit. When he was asked whether he wanted banks to move to France after Brexit, he replied that he “will have a series of initiatives to get talented people in research and lots of fields working here to come to France” in case he gets elected. It comes on the back of a number of recent events like the Paris FinTech Forum that focus on getting a piece of London’s FinTech pie.

 

Berlin calling

Likewise, other European jurisdictions have been reaching out to both established financial institutions and FinTech start-ups to tempt to move their operations to their respective financial centres, too. A BBC programme cited in December that it had learned that “at least eight centres are now actively vying for the UK’s financial business – Paris, Frankfurt, Dublin, Luxembourg, Amsterdam, Madrid, Bratislava, and the Maltese capital, Valletta”. The Spanish regulator amended some regulations at the end of last year to allow fast-track authorization and submission of documents in English similar to the German initiative (for the full statement, click here). Even Switzerland, regardless the fact that it’s outside the EU itself, believes it can benefit from Brexit.

The race is on, but that has been the case ever since the day the British people decided in favour of the referendum. Just remember how a van drove around London during the days after the vote showing a simple message on its large billboard:

“Dear start-ups, Keep calm and move to Berlin!”

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