Daily Times

European banks and investment funds that want a base in Britain after Brexit must have sufficient senior staff on the ground so they can be properly supervised, the Financial Conduct Authority said on Wednesday.

Britain has left the European Union and transition arrangements end in December, after which financial companies from the EU will need authorisation to operate in Britain as a branch or subsidiary.

The British government is keen to keep its markets open to maintain the City of London as a major global financial centre, and is due shortly to propose legislation to this end. More than 1,500 European firms and 600 funds have already obtained temporary permission, giving them time to seek full UK authorisation under minimum standards set out by the FCA in a public consultation paper on Wednesday.

The watchdog said it expects more international firms to seek authorisation, or a licence, noting that it was committed to Britain being an open financial market.

But the FCA told the banks on Wednesday they must have enough senior officials in London if they want a licence.

“The FCA expects a firm seeking authorisation to have an active place of business in the UK to enable us to effectively supervise its UK activities,” said Nausicaa Delfas, the FCA’s executive director of international said on Wednesday.

Senior managers directly involved in managing UK activities would need to spend an “adequate and proportionate” amount of time in Britain, the regulator said.

The FCA said if a company meets the authorisation requirements and has good risk controls then it will get a licence.

Simon Morris, a financial lawyer at CMS, said the draft standards reflected the UK’s “open door” approach that contrasted with the EU’s increasingly protectionist stance. Under EU rules, banks based in London have had to set up hubs in the bloc because free access to the single market ends on Dec. 31, with future direct access limited or temporary at best.

Around 25 banks have obtained new licences or restructured existing ones in the euro zone due to Brexit, with a further 10 substantially increasing their activities, the European Central Bank has said.

The ECB has said they must be adequately staffed and have enough assets to be profitable and to avoid being excessively reliant on a parent elsewhere.

Analysts say that for some banks there may not be enough business to operate a fully fledged hub in both London and in the EU profitably in the longer term and they are likely to ultimately scale back or close one of them. JPMorgan is moving about 200 billion euros ($234.14 billion) from the UK to Germany as a result of Britain’s exit from the EU, Bloomberg News reported on Wednesday, citing people familiar with the matter.