zeb breakfast

Felix Hufeld, President of BaFin, in London

Felix Hufeld, President of the German Financial Supervisory Authority BaFin, addressed the implications of Brexit in front of more than 80 representatives of financial institutions and specialist media as part of a breakfast briefing in London organized by zeb.

In his speech, Felix Hufeld called upon banks forced to relocate parts of their business operations into the European Union due to Brexit to submit the required applications in due time since BaFin didn’t have unlimited resources. The Brexit process was causing problems in several areas, Hufeld added. As early as in spring, numerous foreign banks with European headquarters in the financial district of London voluntarily approached the German authority in order to find out to what extent BaFin could support them with relocating and the related regulations. Now the BaFin President advises financial institutions planning to relocate their business operations into the European Union to hurry up. It’s common knowledge that various international banks have to apply for licenses from the financial authority to transform branches in the EU into subsidiaries or even set up brand new units there. “Institutions would do well to submit license (extension) applications sooner rather than later,” warned Hufeld in his speech in London. Even if the supervisory authorities were partly prepared to accept provisional arrangements, many discussions, workshops and reviews would be required beforehand. The situation was new for all stakeholders. They would have to “pave the way ahead first, before it can be taken”, said Hufeld. According to Hufeld, provisional arrangements were becoming ever more likely since the Brexit negotiations still showed little progress even after five completed rounds of talks.

If the UK was to leave the EU in March 2019 as planned, international banks would no longer be able to conduct their European business operations from the financial center of London. Therefore, it is partly required to establish new units in the European Union. However, it wouldn’t be enough to only “set up a letterbox”, warned Hufeld. “One thing that we will not accept is empty shells with only a P.O. box and a phone with call diversion to London”, added Hufeld. The core of the banking business and the control units as well as the management board would have to be located within the EU. Hufeld clearly specified that in the long run BaFin expects the top management to be present in the 27 EU states “with more than just a door sign”. He also pointed out that the institutions would not be allowed to avoid relocating sensitive units, such as risk controlling or internal audit. The BaFin President expects adequate control units to be in place within the EU subsidiaries.