The European Central Bank has said it could allow banks relocating operations to Europe from Britain more time to meet certain requirements such as local risk management capabilities and governance structures.
The regulator said it will be flexible as banks set up European operations and that it will take decisions on a case-by-case basis. The ECB will decide on the level of flexibility and the deadline for meeting supervisory requirements based on banks' long-term target operating models and reasonable business plans.
However, banks should not regard the transition period tentatively agreed between EU and U.K. negotiators as an excuse to delay planning, the ECB said, noting that they should submit applications regarding relocations by the end of the second quarter. The transition period should be used to implement their Brexit strategies and adapt operations to the new system following Brexit.
The May 16 statement comes after the EU and the U.K. agreed March 19 on a draft 21-month transition deal, running through the end of 2020, to phase in the U.K.'s exit from the bloc. Irrespective of whether a transition period is agreed, the ECB said it understands the challenges that the relocating banks could face in adapting to the new situation following Britain's departure from the union.
