ECB tells banks to 'step up' Brexit relocations

London-based banks have been urged by the European Central Bank to increase the number of staff they are relocating to hubs in the eurozone in case the UK leaves the European Union without a deal.

Since Boris Johnson became prime minister last month, the chances of a no-deal Brexit appear to have increased with the new premier promising to leave the bloc on October 31 "do or die".In the immediate aftermath of the Brexit referendum three years ago, London-based banks were expected to shift posts to the continent in their thousands. In fact, the count so far has only been in the several hundreds.The main problem for the financial sector is that, in the event of a no-deal Brexit, UK-based institutions will lose the 'passporting rights' that currently allow them to operate freely throughout the EU.

Banks need to prepare for all possible contingencies

In a statement, the central bank said, “While the risks posed by a no-deal Brexit to overall euro area financial stability would be manageable, the ECB expects banks to continue preparing for all possible contingencies.“So far, banks have transferred significantly fewer activities, critical functions and staff to euro area entities than originally foreseen as part of their plans for Brexit day one.“Looking ahead, the ECB sees a risk that, as a result of the delays observed, banks will not be able to fully implement their target operating models within the timelines agreed with their supervisors.“The ECB now expects banks to speed up the implementation of their plans. Where contingency plans for a no-deal scenario are not yet fully implemented, banks should step up their preparations to minimise execution risk.”

Relocation Resources

Are you involved in relocating staff from the UK to the EU (or in fact anywhere in the world)? Our free relocation factsheets can help. The factsheets cover: talent resourcing and managementgroup movesfamily support, preparing for Brexit, relocation policy and much much more. Visit our Global Mobility Toolkit hub to download your factsheets

Banking: operational challenges need to be addressed

The ECB said that banks, “should also address operational challenges associated with transferring staff and clients and setting up the necessary internal processes and systems”.Conor Lawlor, director of international and Brexit policy at UK Finance, the body representing more than 250 firms across the sector, said, “The finance sector has long been focused on contingency plans to mitigate the impact of no deal. The industry is as prepared as it can be with respect to the steps that it can take unilaterally.“However, there remain a number of mitigating measures that could be taken by EU authorities to minimise disruption for firms and their customers on both sides of the Channel. This should include clarifying that UK-based lenders will be able to continue serving their customers in Europe for a limited period in a no-deal scenario.”The ECB has long been urging financial firms to get fully prepared for Brexit. It has required banks to submit plans, “in particular regarding the build-up of local risk management capabilities and governance structures” in the eurozone to be able to continue serving clients with the central bank’s blessing.In an attempt to avoid firms setting up so-called 'empty shell' units on the continent controlled from London, the ECB has insisted banks set up a meaningful presence within the eurozone, including the transfer of assets and decision-making staff.

For more news, visit our Brexit and United Kingdom sections.

Subscribe to Relocate Extra, our monthly newsletter, to get all the latest international assignments and global mobility news.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Global Mobility Toolkit download factsheets resource centreAccess hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online Directory

Related Articles