ECB Blog on Preparation for the End of the Brexit Transition Period
On July 9, the European Central Bank (ECB) published a blog by Yves Mersch, member of the Executive Board of the ECB and vice-chair of the Supervisory Board of the ECB, on the preparations of European Union (EU) banks for the end of the Brexit transition period (the Blog).
The ECB notes that banks in the EU and United Kingdom (UK) post-Brexit will no longer enjoy the benefits of the single EU market. Consequently, it is crucial that banks focus on progressing towards their target post-Brexit operating models.
In the Blog, the ECB welcomes the European Commission’s announcement regarding the temporary equivalence of UK central counterparties, but banks must nonetheless prepare for post-Brexit in this area. The temporary equivalence should provide the industry with more time to adjust clearing operations to the UK’s new status as a third country. For more information on this topic, please see the advisory prepared by Katten, available here.
The ECB also clarifies that banks, which have failed to hire staff with sufficient seniority and skills, neglected to make necessary transfers of material assets or unduly split trading desks across multiple legal entities, will not be considered as complying with the ECB’s requirements. The ECB believes that its expectations are very clear: all activities related to EU products or EU customers should, as a general principle, be managed and controlled from entities located in the EU.
The Blog is available here.