LONDON The European Central Bank may vet responses to a Bank of England letter asking lenders how they will cope with Brexit, a senior banker said on Friday.
Edward Bowles, regional head of corporate and public affairs at Standard Chartered bank, was speaking at a seminar in Brussels hosted by think tank Bruegel.
"We heard earlier this week that perhaps the SSM is now asking the 27 firms with operations in London to vet their responses with them before they send them in," Bowles said, referring to the ECB's supervisory arm.
Sam Woods, head of the Bank of England's Prudential Regulation Authority (PRA), has given banks operating in Britain a July 14 deadline to spell out how they would deal with an abrupt UK departure from the European Union in 2019.
Many of the banks, such as Societe Generale, Deutsche Bank and BNP Paribas, are supervised by the ECB under its single supervisory mechanism or SSM.
London-headquartered Standard Chartered, which would have received the letter from Woods, said last month it was in talks with regulators about making Frankfurt, where the ECB is located, its European base after Brexit.
Bowles was asking Gerry Cross, the Central Bank of Ireland's director for policy and risk, for his views on Woods' letter.
"I don't have any particular views beyond that it was a very sensible letter for the PRA. It complimented well with the activity we are seeing on our side of the Irish Sea," Cross told the seminar, adding that the letter had helped give clarity.
The ECB had no immediate comment.
Britain has triggered formal divorce talks with the European Union and will leave the bloc at the end of March 2019. It is unclear what sort of trading relationship Britain will have with the EU after that, raising concerns about disruption to financial markets.
Cross said banks are planning for the worst.
"From a regulatory perspective, that is the right strategy. There is no doubt there is a non-trivial risk that come March 2019 things will not be in great shape," he said.
Simon Gleeson, a financial services lawyer at Clifford Chance, said there is no framework for cross-border supervisory cooperation after Brexit.
"I strongly believe there will be a hard Brexit with no agreement. In that situation, there is a real risk that supervision of major European firms will simply fall apart," Gleeson said.
Cross said banks were "concretising" decisions in coming months about moving activities to new subsidiaries in the EU27 to avoid being cut off from customers.
But regulators are still grappling with how much "substance" new subsidiaries should have, though risk management must be controlled locally, Cross said.
Gleeson said this approach was 20 years out of date as risk management was done under a global model.
"Risk management is not a bloke sitting behind a desk looking at a spreadsheet, scratching his head," Gleeson said.
(Additional reporting by Francesco Canepa in Frankfurt; Editing by Catherine Evans)