FRANKFURT, Oct 12 (Reuters) - Banks that want access to the European Union after Brexit need to set up more than an “empty shell” in the bloc, the region’s regulators warned on Thursday, a demand that could prompt a bigger shift in jobs and business from London.
Taking its first official position on potential Brexit movers, the European Banking Authority warned against granting banks a foothold in the EU with letterbox-style operations.
“Existing authorisation standards should not be lowered,” the agency said, reiterating a similar precondition imposed by the European Central Bank. “‘empty shell’ companies should not be authorised.”
“Firms should provide a clear explanation of the choices they are making in terms of the substance of the incoming entity,” said the EBA, which includes supervisors from around the 28-country European Union and the ECB.
The statement addresses one of the biggest questions for international banks in London, many of whom are setting up bases in continental Europe or in Dublin to maintain EU access once Britain leaves.
It makes clear that regulators in Frankfurt, Paris or Dublin are united in their demand that substantial operations be moved rather than token offices, increasing the costs for banks that shift.
The EBA also ruled out the booking of trading that happens in London, say, in Frankfurt without safeguards, such as moving substantial capital, to cope with any loss.
Reporting By John O'Donnell. Editing by Jane Merriman