Serge de Cillia, CEO of the Luxembourg Bankers' Association, says fish are getting more attention than financial services in Brexit talks.
The European Banking Authority recently warned banks to get moving on Brexit, saying that their lack of preparedness is a huge risk. Serge de Cillia, CEO of the Luxembourg Bankers’ Association, says banks are getting on with it but need guidance from European authorities.
The European Banking Authority (EBA), the supervisory authority of Europe’s banks and credit institutions, has warned banks to get ready for the UK’s departure from the EU, warning that their lack of preparedness creates significant risks. Delano talked to Serge de Cillia, CEO of the Luxembourg Bankers’ Association (ABBL), for his reaction.
In an opinion published 25 June 2018, the EBA demanded, “competent authorities to ensure that financial institutions take practical steps to prepare for the possibility of a UK withdrawal with no ratified Withdrawal Agreement and no transition period.”
Andrea Enria, chair of the EBA, said, “Firms cannot take for granted that they continue to operate as at present, nor can they rely on as yet unrealised political agreements or public policy interventions.” He added, "Risks, capacity and legal implications must be examined and addressed."
But we are getting on with it, say banks
“Brexit is a risk among other risks that banks need to manage,” said de Cillia. “We have experts in risk and compliance in our banks who are working on it.” However, there is only so much they can do without guidelines at a European level from the European Commission, the European Central Bank and the European Banking Authority (EBA).
“The European Banking Federation has established a Brexit task force working on technical aspects, but it seems that financial services is not a priority for the European Commission in the Brexit discussions compared to other domains--fish are getting more attention.”
Among the most pressing issues in need of clarification is clearing and settlement. As de Cillia explained, “Clearing and settlement on derivative contracts is mostly done in London and we still don’t know how this will change post-Brexit. We need clear communication from the European Commission to confirm if we will have a transition period, separate from the political one. You cannot change clearing bank from one day to the next.”
Debt finance transactions are another sticking point. Banks issue debt products, which they then sell to increase their capital base. What needs to be clarified is, if debt products currently set up under UK law can continue to be used by European banks after Brexit. “If not, we will need to develop new products. It is a nightmare,” said de Cillia.
So, as well as clearing banks and debt products, banks also need guidance on payments services, securities and commodities, where London is currently the major player. Add to that, GDPR (global data protection regulation) and AML (anti money laundering) and it seems de Cillia is spot on when he say:
“We have a lot of open files that we need clarity on. It is okay for the EBA to issue an opinion warning banks to get prepared, but how? Please helps us get the clarity we need to do so.”
That said, banks are not sitting back waiting to see what will happen. They, like asset managers, are getting ready in their own way. “Clients cannot accept this kind of uncertainty, so banks are taking steps. They are moving portfolios and certain activities to Luxembourg, Dublin and Frankfurt,” explained de Cillia.
Some banks, which already had a presence in Luxembourg, are making moves to make the grand duchy their European subsidiary, moving away from the branch model. JP Morgan, Citibank and Northern Trust, for example.
“And these are the ones we know about. Many more are taking action without communicating about it.”