General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
February 15, 2019

Joachim Wuermeling, a member of the Executive Board of Deutsche Bundesbank, spoke at the Embassy of the Federal Republic of Germany in London. He discussed the implications of Brexit for UK branches of German banks. From the perspective of a bank and from the perspective of a banking supervisor, he mentioned that the future regime under which banks and companies, in general, will operate after March 29, 2019 remains unclear.

Prof. Joachim Wuermeling stated that UK branches of German banks (and Single Supervisory Mechanism, or SSM, banks in general) will need to become third-country branches, as per what is known at the moment. The temporary permissions regime of PRA certainly buys time. However, there is no alternative to conversion into third-country branches. So far, PRA has received some applications for third-country branch authorization in UK. For German banks, unlike other SSM banks, there is no formal requirement for the home supervisor to approve a third-country branch. However, given the aim of establishing a level playing field among all current and future SSM banks, it should be expected that the SSM addresses certain requirements via other supervisory measures, where necessary, to ensure that the future set-up of the new third-country branches is in line with the expectations of SSM. A third-country branch will not be allowed to perform central functions for its SSM domiciled group. Moreover, any outsourcing must not hamper the efficient and effective supervision of SSM entities. Not all SSM banks are currently fully compliant with the respective supervisory expectations of SSM.

Making the transition from the EU28 to the EU27 as smooth as possible for the financial sector will require close cooperation between SSM and PRA. The details of such a split of responsibilities are being negotiated. He discussed "....what a split of responsibilities would mean for UK branches of German (and other SSM) banks. The truth is: we can’t really tell just yet. We’ll have to wait for the final outcome of the negotiations between supervisory authorities. As I have said, these negotiations are already under way and I am optimistic that they will be concluded soon." Overall, the goal must be to achieve an adequate level of information-sharing and joint supervisory work that does not lead to an increased workload for all parties involved. The agreement on a split of responsibilities will need to leave room for accommodating specific cases. On the basis of the agreement, PRA plans to process applications for third-country branches. In the short run, the temporary permissions regime will mitigate the outcome of a possible hard Brexit.

Nevertheless, financial institutions must prepare thoroughly, although the outcome in the long run depends on the way Brexit re-shapes the European financial system. However, the uncertainty continues. Since the referendum in June 2016, both financial institutions and supervisors have put tremendous effort into better understanding and preparing for every possible outcome. Although some tasks are yet to be completed, most banks are well advanced in their preparations, said Prof. Wuermeling.


Related Link: Speech


Keywords: Europe, EU, UK, Germany, Banking, Brexit, SSM, Third Country Branches, Bundesbank, PRA, BIS

Related Articles

EP Resolution on Proposal for Sovereign Bond Backed Securities

The European Parliament (EP) published adopted text on the proposal for a regulation of the European Parliament and of the Council on sovereign bond-backed securities (SBBS).

April 16, 2019 WebPage Regulatory News

FDIC Consults on Approach to Resolution Planning for IDIs

FDIC approved an Advance Notice of Proposed Rulemaking (ANPR) and is seeking comment on ways to tailor and improve its rule requiring certain insured depository institutions (IDIs) to submit resolution plans.

April 16, 2019 WebPage Regulatory News

HKMA Decides to Maintain Countercyclical Capital Buffer at 2.5%

HKMA announced that, in accordance with the Banking (Capital) Rules, the countercyclical capital buffer (CCyB) ratio for Hong Kong remains at 2.5%.

April 16, 2019 WebPage Regulatory News

EP Approves Agreement on Package of CRD 5, CRR 2, BRRD 2, and SRMR 2

The European Parliament (EP) approved the final agreement on a package of reforms proposed by EC to strengthen the resilience and resolvability of European banks.

April 16, 2019 WebPage Regulatory News

PRA Seeks Input and Issues Specifications for Insurance Stress Tests

PRA announced that it will conduct an insurance stress test for the largest regulated life and general insurers from July to September 2019.

April 15, 2019 WebPage Regulatory News

PRA Finalizes Policy on Approach to Managing Climate Change Risks

PRA published the policy statement PS11/19, which contains final supervisory statement (SS3/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change (Appendix).

April 15, 2019 WebPage Regulatory News

EC Launches Pilot Phase on Implementation of Ethical Guidelines for AI

EC launched a pilot phase to ensure that ethical guidelines for the development and use of artificial intelligence, or AI, can be implemented in practice.

April 15, 2019 WebPage Regulatory News

EBA Single Rulebook Q&A: First Update for April 2019

EBA published answers to nine questions under the Single Rulebook question and answer (Q&A) updates for this week.

April 12, 2019 WebPage Regulatory News

EIOPA Statement on Application of Proportionality in SCR Supervision

EIOPA published a supervisory statement on the application of proportionality principle in the supervision of the Solvency Capital Requirement (SCR) calculated in accordance with the standard formula.

April 11, 2019 WebPage Regulatory News

FED Updates Form and Supplemental Instructions for FR Y-9C Reporting

FED updated the form and supplemental instructions for FR Y-9C reporting. FR Y-9C is used to collect data from domestic bank holding companies, savings and loan holding companies, U.S intermediate holding companies, and securities holding companies with total consolidated assets of USD 3 billion or more.

April 11, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2920