March 26, 2019 / 10:40 AM / in 2 months

EU watchdog sees no imminent banking risks from no-deal Brexit

FILE PHOTO: Elke Koenig, Chair of the Single Resolution Board, speaks during an interview with Reuters in Brussels, Belgium, August 10, 2016. REUTERS/Francois Lenoir/File Photo

BRUSSELS (Reuters) - Euro zone banks face no imminent risks from a no-deal Brexit, the head of the European Union agency responsible for handling failing lenders said on Tuesday.

The reassuring message came as Britain grapples with its worst political crisis in decades ahead of an April 12 deadline to secure a deal to leave the European Union.

“There will be volatility, but given the level of preparations, I hope and I am convinced there should be no imminent risks to financial stability” in the event of a no-deal Brexit, Elke Koenig, the head of the Single Resolution Board (SRB), told a news conference.

Koenig, who chaired Germany’s banking supervisor before setting up the SRB in 2015, said EU and British financial institutions were prepared for any Brexit outcome, and so were euro zone lenders although “banks could always do more”.

A so-called hard Brexit, with Britain crashing out of the EU without a deal, would hamper trade as business would face immediate trade barriers and other restrictions.

“The impact on the real economy might have repercussions on the banking sector, but I am not expecting the problem to come straight from the banking sector,” Koenig said.

Koenig also said a court ruling last week that overturned an EU decision to block the rescue of Italy’s Tercas bank in 2014 could open the way for discussions about the role of deposit guarantee schemes beyond their core function of protecting savers of collapsing banks.

Brussels had rejected Italy’s plan to save the bank through the national deposit fund, but EU judges effectively dismissed Brussels’ argument.

“It is a case that opens up perhaps the opportunity to discuss what should deposit schemes be about,” Koenig said, adding they could be used for “alternative measures” and not just as a safety net for depositors affected by a bank crisis.

Reporting by Francesco Guarascio, Editing by Gabriela Baczynska and Mark Potter

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