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30 January 2017

Financial Times: Germany will not ease rules to lure bankers after Brexit, warns BaFin

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Germany’s financial watchdog BaFin warned that it would not relax its rules in a bid to attract banks looking for a new home in the EU following the UK’s Brexit vote.

Speaking after a meeting on Monday with representatives of around 25 banks from the US, UK, Japan and Australia, as well as the ECB and Germany’s Bundesbank, Peter Lutz, an official responsible for banking supervision at BaFin said that foreign banks were “welcome” in Germany.

However, he added that there would be no “regulatory arbitrage”, stressing that banks would have to move appropriate numbers of managers and risk management staff to Germany in order to be eligible for a license.

“Setting up a letterbox won’t be enough,” he said.

Mr Lutz said that no banks had yet applied for licenses in Germany as a result of the UK’s vote to leave the EU, but that he expected the banks involved to decide by the end of the first or the beginning of the second quarter whether or not they would move to Frankfurt. [...]

Full article on Financial Times (subscription required)

Bloomberg: Germany said to let banks fleeing Brexit keep risk models

Germany’s financial regulator offered to allow most banks that move operations there because of Brexit to keep current models for setting capital requirements for as long as two years, people with knowledge of the matter said.

BaFin told banks at a meeting Monday that it would still vet each case individually and expect lenders to shift all business to risk models approved by the regulator after the transition period, according to two people, who asked not to be identified because the matter is private. All new loans would have to be risk-weighted under BaFin-approved models straight away, they said.

Allowing banks to keep their internal risk models for loans would prevent relocating firms from having to apply different capital requirements on their existing business. Each risk model used in Germany would need to be affirmed, but previous approval by a trusted regulator would facilitate the process, another person said. [...]

BaFin also pledged not to be overly strict on how many employees banks would have to transfer to Germany in order for that business to be considered as based inside the country and thereby gain the right to operate across the EU, the two people said. Bafin would only require managers to physically move to gain such passporting rights, though the regulator would decide on a case-by-case basis, the people said. [...]

Full article on Bloomberg

© Financial Times

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