As the financial services organisations in London seek alternative paths into the EU, at least 19 banks have publicly declared plans to establish or expand legal entities in Ireland according to the most recent EY Brexit tracker. Others have declared for Frankfurt, Paris and Amsterdam.
Yet, not a single financial institution has lodged a formal Brexit related banking application with the Central Bank of Ireland (CBI). Why? In this piece, we look at why financial institutions especially banks need a licenced entity within the EU, what they need to do to get those licences, and what challenges they may be facing.
Once the United Kingdom withdraws from the EU on 29 March 2019, unless a new agreement between the EU and the UK is negotiated, banks licenced there will no longer have access to the ‘passporting’ mechanism, which allows banks to locate an entity in one EU member state and then operate throughout the EU. This will impact major British banks, as well as financial institutions in Asia, the US and Switzerland who have headquartered their EU banking in the UK over the last 30 years.
These financial institutions are being asked by both UK and EU authorities to make plans now if they wish to ensure continued access to the EU markets and clients.
Cormac Kelly, Advisory leader for International Financial Institutions and Brexit at EY in Dublin, said: “We’re facing a period of protracted uncertainty, and the challenge for organisations is that they can’t wait for the final negotiated outcome to act. It’s important to make strategic decisions and put in motion appropriate plans with a purpose, using all available information. These decisions should be made on a ‘no regrets’ basis – we don’t have the benefit of hindsight, so instead organisations should make the best decisions they can here and now to be ready for a post-Brexit environment.”
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This report was initially published in Finance Dublin in November 2017.