The president of Germany’s Federal Financial Supervisory Authority, better known as BaFin, Felix Hufeld, said that financial regulators could implement emergency measures in the case of a no-deal Brexit.
According to a report from Reuters, at a banking conference in Frankfurt today Hufeld said that if Britain leaves the European Union (EU) without an exit deal that clarifies the many outstanding legal questions, BaFin could bring in temporary measures.
He said: “These would be just temporary fixes to avoid chaos.” Whilst he didn’t get any more specific than that, he did also state that Germany is processing more than 25 banking licenses with the Brexit deadline looming over financial institutions.
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This is the most precise number that BaFin has given and the number is not surprising. Since Britain formally triggered Brexit by invoking Article 50 last year, a number of international banks have been moving their United Kingdom operations to EU countries, with Germany being a particular hotspot.
Regulators warn: be prepared for a hard Brexit
According to the European Securities and Markets Authority (ESMA), if a financial institution wants to continue to provide financial services in the EU or to EU-based clients, then they need to have a licensed entity in one of the 27 EU member states.
Although there is a tentative agreement in place to allow financial institutions a transition period up until December 2020, it is not legally binding until the Brexit deal is finalised and ratified by both sides.
Until then, financial institutions and regulators alike need to be prepared. In fact, regulators such as ESMA, the Cyprus Securities and Exchange Commission (CySEC) and the European Banking Authority have published warning after warning for financial institutions to make the appropriate arrangements ahead of the deadline. Above all, this means receiving the proper authorisation to operate in the EU ahead of the deadline on March 29 2019.