ESMA lays out relocation guidelines for UK-based banks

ESMA has provided advice to national competent authorities looking to relocate from the UK.
By Paul Walsh
The European Securities and Markets Authority (ESMA) has released guidance for banks to follow during potential relocation procedures from the UK to the EU.

The guidance is aimed at national competent authorities (NCAs), particularly those in the remaining 27 member states in the EU that will oversee the relocation process.

ESMA’s advice recommends new authorisations must be granted in full compliance with Union law and coherently across the 27 member states, and that any outsourcing or delegation should be should be strictly supervised.

As a result, NCAs are also warned to expect an increase in activities related to authorisation and supervision.

Other principles include NCAs having to verify the objective reasons for relocation as well as taking measures to avoid “letterbox” entities in the EU member states that may occur through outsourcing.

“The UK plays a prominent role in EU financial markets and the relocation of entities, activities and functions to the EU27 creates a unique situation requiring a common effort, at EU level, to safeguard investor protection, the orderly functioning of financial markets and financial stability,” said Steven Maijoor, chair at ESMA.

“Firms need to be subject to the same standards of authorisation and ongoing supervision across the EU27 in order to avoid competition on regulatory and supervisory practices between member states,” said Maijoor.

The guidelines will impact JP Morgan’s decision last month to ‘significantly’ expand its custody and fund services business in Ireland. JP Morgan revealed last month the purchase of office space in Dublin to accommodate over 1,000 people.

James Kenny, head of investor services at JP Morgan, said the bank’s impression is that some jobs can be “filled by people moving from other countries” due to Ireland’s flexible immigration policy.

ESMA stated it intends to provide guidance for asset managers, investment firms and secondary markets relocating from the UK to Europe in due course.

Speaking at an industry conference last month, Maijoor said ESMA plans to publish proposals to enhance controls over clearing houses in the UK, such as LCH and ICE Clear Europe, which dominate the euro-swaps clearing market.