Insofar as anything to do with Brexit can be regarded as wrily amusing, perhaps the mid-August announcement from the ECB, which directly supervises the 114 biggest Eurozone banks (constituting 82% of Eurozone banking assets), “Brexit: stepping up preparations” might be, for the statement:
“So far, banks have transferred fewer activities, critical functions and staff to euro area entities than originally foreseen as part of their plans for Brexit Day 1. The ECB now expects banks to speed up the implementation of their plans”.
Readers will remember regarding Barclays Bank’s transfer of (much of) its EU27-facing business to its Irish subsidiary under FSMA Part VII that reportedly, and despite the aggregate amount of assets to be transferred, it will result in BBI increasing its workforce by only 150 employees, mainly local recruits. The EBA’s October 2017 “Opinion” had warned regulators to avoid the (inevitably-named) “regulatory race to the bottom” if UK firms apply on the basis of a minimal presence and back-to-back operations into the UK, and this pre-emptive shot across the bows of EU27 countries tempted to attract UK firms needing a post-Brexit EU27 presence with light-touch regulation emphasised how they would “need to have substance locally… there cannot be empty shells or letter box banks”. Readers will also remember the EBA’s guidelines on outsourcing:
“the management body should ensure that sufficient resources are available to appropriately support and ensure the performance of those responsibilities, including overseeing all risks and managing the outsourcing arrangements. Outsourcing must not lead to a situation in which an institution becomes an ‘empty shell’ that lacks the substance to remain authorised.”
The ECB’s pronouncement that some EU27 banks need to reduce their so-called back-branching in order to meet the ECB’s “supervisory expectations” seems a touch optimistic: if they have not met the ECB’s expectations by now, how much more can they do by the end of October? It may seem a little counter to the 1st February FCA/ESMA press release announcing an MOU covering “supervisory cooperation, enforcement and information exchange”, which ESMA said would “allow certain activities, such as fund manager outsourcing and delegation, to continue to be carried out by UK based entities on behalf of counterparties based in the EEA”, but the ECB’s concern is not about outsourcing per se but about brass plate or letterbox subsidiaries, and having management and operations locally which can be supervised and held to account.
and then 