ECB warns slow-moving British banks they are risking single market lockout

A European Central Bank official has cautioned that British-based banks who intend to relocate some operations to the EU before Britain quits the single market are falling too far behind schedule.

Issuing the warning though a newsletter article, ECB supervisor Sabine Lautenschlaeger said yesterday that international banks based in London are putting at risk the licence they will require from the ECB to operate in the EU post-Brexit by not being properly prepared.

The German, who represents the ECB’S supervisory arm on the central bank’s board, said: “Frankly, the banks are not as far advanced as we would like them to be.”

She explained: “Of the banks that have indicated an interest in relocating operations to the euro area, a number of the larger banks have made progress in their planning. But we have not seen many final decisions yet.”

Ms Lautenschlaeger added that the ECB would not grant licences to “empty shells” and would take a tough stance on “back-to-back transactions”, where a bank would conduct trades out of its EU base but process and risk manage them at its London office.

“While we do not rule out this practice per se, ultimately we expect banks to manage relevant parts of their risks locally and independently,” Lautenschlaeger said.

She also said she expected banks moving to the EU to update their recovery plans, which kick in if they fail, quickly after moving to an EU site.