Video: Passporting rights after Brexit
The financial industry is intensively preparing for Great Britain’s departure from the European Union. If it comes to a hard Brexit, banks headquartered in London will lose their passporting rights and no longer be permitted to do their banking business or provide financial services in the EU. What banks need to consider when applying for a banking licence from the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) and moving business to Frankfurt is explained by Prof Kai-Michael Hingst in an interview with Finance-TV.
What alternatives are there when applying for a banking licence in Germany?
Kai-Michael Hingst: That depends on how the bank is represented in Frankfurt up to now. Does it have a legally independent entity here or only a branch? If a subsidiary already exists, it should be the entity to apply to BaFin for a licence. A branch office can be spun off and restructured as a subsidiary before applying.
What requirements must be fulfilled?
Kai-Michael Hingst: BaFin will be attaching great importance to preventing “brass plate banks” from popping up in Frankfurt – and they have ways and means to do so. Namely, BaFin will want to ensure that the requirements of the German Banking Act (KWG), as well as the MaRisk (minimum requirements for risk management), are adhered to. Every applicant, including British banks, must fulfil these requirements. For example, they must establish certain independent functions such as compliance, risk controlling and internal auditing in Germany in order to be permitted to use a German licence. It is also important to remember that BaFin will not tolerate outsourcing on a large scale to group companies in London, for example to keep the Frankfurt headcount low.
How long will it take BaFin to review a licence application?
Kai-Michael Hingst: BaFin must be given credit for its intention to process applications quickly. Its estimate is six to a maximum of twelve months. Considering the complexity of the matter and the large number of applications that have already been announced, this is gratifyingly short. As has been the case with FinTechs, the authority is very actively pursuing the goal of counteracting Germany’s reputation as a difficult location in a regulatory sense – successfully, because according to surveys, up to 15 British banks are considering applying to BaFin for a banking licence.
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