Brexit: get ready for changes
Over the past few months, there has been an understandable focus on dealing with the effects of the Covid-19 outbreak on our economies. However, we should not forget some of the other challenges facing the European financial sector, among them the fact that the United Kingdom will leave the European Union at the end of the year.
Yesterday, the European Commission published its Brexit readiness communication, calling on banks, investment firms and other financial sector actors to consider how this will affect their business and to take all the necessary steps to prepare.
The SRB is monitoring the situation closely with the European Central Bank, the European Commission and other financial stability partners. We also work closely with the Bank of England, and look forward to continuing our fruitful cooperation.
The SRB has been working with the banks under its remit to prepare for this scenario for some time, and published its Brexit expectations document in November 2018. This document covers MREL eligibility, internal loss absorbency, operational continuity, access to FMIs and other matters. We communicated our expectations on an individual basis to banks. The SRB put a particular emphasis on issuances under UK law, raising awareness that they may become non-eligible for MREL.
The SRB’s Expectations for Banks document and the recently published MREL policy under the Banking Package also lay out measures applying to third countries, which will apply to the UK from 1 January 2021. This includes adding relevant clauses to contracts governed by third country law to ensure eligibility for MREL, enhance cross-border recognition of resolution actions or support operational continuity in resolution.
As previously stated, the 2020 resolution planning cycle will take the impact of Brexit and the end of the transition period into account while continuing to make progress towards all banks being resolvable. What is clear is that there has been a significant lead-in time for Brexit and the SRB has been transparent on what we expect from banks. The time of uncertainty is now over. Banks should use the remaining time to be fully prepared.
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About the author
Elke Koenig was Chair of the Single Resolution Board (SRB) from its establishment to January 2023. Prior to this, she was President of the German Federal Financial Supervisory Authority (BaFin) from 2012 to 2015.
After obtaining a doctorate from the University of Cologne in Germany, she spent many years working for companies in the financial and insurance sector. From 1980 to 1990, she worked for KPMG auditing and...