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September 12, 2018

Joachim Wuermeling of Bundesbank spoke at a reception to welcome Gabriele Kabelac, the new chief representative of Bundesbank's New York office, and to bid farewell to Dr. Claudia Stirböck in New York City. During his speech, among other topics, he discussed the rationale for international cooperation in financial regulation. In this context, he also examined the implications of Brexit and the Intermediate Holding Corporation laws in the United States.

Regarding the Brexit issue, he mentioned that many people in the UK are only now beginning to realize how dependent their economy has been, and still is, on EU membership. Many problems became only obvious during the exit negotiations. He added that, in the 21st Century, sovereignty is the capacity to decide rationally about where cooperation is, on balance, better than going it alone, even if it entails unpleasant compromises. He also said that “in light of Brexit and the end of London's direct access to the EU single market, fears of regulatory fragmentation are worsening and leading to more calls to maintain a global level playing field. That is why the important achievements of non-discrimination against foreign firms on the one hand and the minimum standards of G20 should be upheld. However, our approach to international cooperation is to make sure that every supervisor can oversee the entities active in its jurisdiction."

Mr. Wuermeling also opined that the Intermediate Holding Corporation laws in the United States work quite well and that this will be true of the forthcoming EU equivalent, the Intermediate Parent Undertaking Regulation. The subsidiarization requirement will also enhance the systemic stability of the financial ties between the UK and the EU after Brexit. Generally speaking, it is also a useful backstop against a regulatory race to the bottom, as it will make it difficult to provide cross-border services from less well-regulated locations. If the transatlantic partnership and close multilateral cooperation are to be resilient cornerstones of the world economy, it needs rational, careful decision-making, policy case by policy case; where some cases will be better dealt with in the national realm, while others will turn out to require coordinated or even cooperative approaches. Bundesbank has a reputation for being principles-oriented. Therefore, it will continue to seek the advice of its US partners and work toward mutually beneficial solutions, where cooperation is rational and viable.

Related Link: Speech

Keywords: Europe, Americas, US, UK, EU, Germany, Banking, International Cooperation, IHC, Brexit, Equivalence, Bundesbank

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