Germany’s BaFin Chief Tells U.K. He’s ‘Missing You Guys Already’By
Hufeld says there’s a ‘different dynamic’ when U.K. is absent
Euro clearing in London without supervision ‘out of question’
Germany’s top banking supervisor said he’s already bemoaning the U.K.’s absence from the world of European Union financial supervision.
“We already miss the U.K. today,” Felix Hufeld, president of BaFin, said after a speech in London. “It’s quite a different dynamic on particular events whether or not the U.K. is part of the team. That’s the reason I said I’m missing you guys already.”
Hufeld contrasted his experience on the supervisory boards of the European Central Bank, where he is Germany’s voting member, with that on the boards of the three European Supervisory Agencies, or ESAs. ECB membership is confined to the euro-zone countries, while all member states are represented on the ESAs’ boards.
Brexit was the biggest-ever setback to European integration, he said. Europe now needs to look to the future and build a foundation for the post-Brexit world, which “will certainly be no easy task,” he said.
As the main European financial hub, the U.K. has enjoyed major influence over the rewriting of the bloc’s banking and markets legislation. This includes rules governing banks’ capital, as well as the EU resolution framework and the sweeping overhaul of market rules known as MiFID II.
Hufeld also discussed clearing, a lucrative industry for London that has become a political football after the Brexit vote. He reiterated the need for EU supervisors to have wide-ranging access to London-based clearinghouses that handle trillions in euro-denominated derivatives wagers, and cautioned against fragmenting the market. The adopted model could mimic the arrangements the bloc has with the U.S. covering the clearing of contracts in dollars, he said.
“One thing should be clear,” he told reporters after the meeting. “It is totally out of the question that such a vast amount of euro-denominated clearing is happening in a third-country clearing venue without any supervisory access on behalf of the EU.”
A means of resolving conflicts between supervisors would be needed, he said, indicating he was open to solutions that didn’t involve the European Court of Justice, one of the U.K. government’s “red lines” in its withdrawal negotiations with the bloc.
Hufeld underlined the increasing risk of a “cliff-edge” Brexit in which the U.K. would crash out of the EU at the end of March 2019 without a framework for future relations. That’s a risk financial services businesses would be unwilling to run, and crunch time for making a decision on relocation would be early next year, he said.
While about 20 applications for authorization to open in Germany have been received, none have yet been released, he said, urging those thinking of moving to act quickly.
BaFin has “limited resources,” he said. “It’s first come, first served.”