The European Union’s market watchdog is investigating ways to stop national regulators competing unfairly with each other as they try to attract firms from Britain after Brexit in a beauty parade of financial centers.

The European Securities and Markets Authority (ESMA) told Reuters it is studying the risk of “regulatory arbitrage” – where some EU states might offer financial firms lighter supervision than other member states in return for the jobs and high tax revenue they would bring.

While the issue concerns business coming from any non-EU country, ESMA’s move is an early sign of how some regulators believe there may be a particular need for precautionary measures for when Britain leaves the bloc.

Regulators in a number of EU countries have made clear they will not tolerate “brass plate” arrangements, where business is officially routed through an office in a member state but senior executives and IT systems remain in London, Europe’s dominant financial center.

However, the risk is that some EU states might be tempted to break ranks and allow such front operations after Brexit.

The issue is particularly likely to affect asset management; Britain is the second largest center for this after the United States, managing 5.7 trillion pounds ($7 trillion) on behalf of clients, many of them in continental Europe.

Financial firms in the UK, worried they will lose access to the bloc’s capital market, are deciding whether to move some operations and staff to new bases on the continent or in Ireland.

Frankfurt, Paris, Luxembourg and Dublin are vying to attract banks, market infrastructure firms, insurers or asset managers.

A spokesman for Paris-based ESMA said its inquiries concerned issues that a national regulator in the EU may face when financial firms from another country show an interest or make an application for a license.

It is not focused on efficiency issues of different financial centers, but rather looking at issues around outsourcing and delegation which could lead to regulatory arbitrage,” an ESMA spokesman said

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