Fine Gael MEP Brian Hayes has welcomed comments from the head of the Single Supervisory Mechanism (SSM) that Frankfurt will closely monitor moves by national regulators who seek to win business from financial firms looking to relocate activities from the UK in the wake of Brexit.
Danièle Nouy, who is chair of the SSM’s supervisory board, acknowledged to Mr Hayes that there are loopholes in the current rules that allow national regulators to make certain offers to financial firms as they seek to win jobs for their own countries.
Earlier this month, Eoghan Murphy, the Minister of State for Financial Services, complained to the European Commission that Ireland was being undercut by rival centres competing to host financial firms looking for an EU base post Brexit.
“It is reassuring to know that the SSM is closely watching the hunt for business arising out of Brexit,” Mr Hayes said. “There needs to be absolute consistency of regulatory approach and a level playing field when it comes to banks’ capital requirements and how their internal models are treated.”
Brass plate
He said Mr Murphy was “absolutely right” to flag this issue and noted that the
Central Bank
of Ireland did not want banks moving to Dublin just to set up brass-plate operations so that they could passport financial services into the EU.
“Ms Nouy said that there are loopholes that can allow banks to be given lighter regulatory treatment based on their location. Some locations may allow a financial institution to be treated as broker-dealer firm, which is effectively a light version of a bank, but is not supervised as a bank.
“Ms Nouy also warned that subsidiaries or branches can be set up in the euro zone that perform a large proportion of their parent bank’s capital market operations. The important thing is that these subsidiaries are not empty shells and that they are staffed properly and have risk-management functions and internal control functions.”
