EU watchdog tells UK banks to prepare for full Brexit

LONDON (Reuters) – Banks using Britain as a gateway to the European Union must fully implement their plans to serve EU customers before the end of the Brexit transition period in December, it said on Wednesday. EU banking watchdog.

Britain left the EU in January, but financial firms have unrestricted access to the bloc under transition agreements that will end on December 31. There is no mechanism for direct access to the EU in deposits or loans from January.

Many large banks have already opened centers in Frankfurt and other parts of the block to continue serving customers there, while EU banks in London such as ING have begun moving some employees home.

The European Banking Authority said these banks must now complete the “full execution” of their Brexit plans, as agreed in their new licenses.

“In particular, financial institutions must ensure that associated management capacity, including adequate technical risk management capabilities, is effectively placed ahead of time,” said EBA.

This should be “according to the magnitude, scope and complexity of its activities,” he said.

The new EU hubs are expected to increase their footprint on the bloc in proportion to the amount of business being conducted there.

“Despite significant action by many financial institutions, there is no room for complacency even for those institutions that have already obtained all the necessary authorizations and permits,” said EBA.

There was still work to be done to change and move Britain’s contracts to EU operations, he said.

Action was also required to address “systemic exposures” to UK-based financial market infrastructure, in part a reference to the large euro-denominated derivative positions held in the clearing houses based in the United Kingdom.

There were also possible “capital impacts,” EBA said. Britain has yet to say whether banks in London will have to hold more capital against eurozone debt after the transition is over.

“Institutions must also assess and take the necessary steps to address any impact on the rights and obligations of their existing contracts, in particular derivative contracts,” said EBA.