EU should harmonize financial supervision standards also because of Brexit - Dombrovskis

RIGA - The European Union (EU) should adopt equal financial supervision standards for all member states not only to better clamp down on money laundering but also because of the UK’s withdrawal from the bloc to prevent financial watchdogs in some member states from taking a more relaxed attitude to actual relocations of British financial institutions, the European Commission’s Vice President Valdis Dombrovkis told LETA.

“The UK’s decision to withdraw not only from the EU but also from the European Single Market means that the UK-based financial institutions, mostly in London, will lose the so-called EU passports and will not be able to provide services to EU clients. Consequently, these banks, investment firms, insurers and others are looking for solutions to this problem,” Valdis Dombrovskis said.

Dombrovskis said that one of the solutions might be to organize UK-EU financial cooperation on the basis of the so-called equivalence decisions. The European Commission may recognize that the British regulatory or supervisory regime is equivalent to the corresponding regime of the EU and vice versa, but this option will be considered for each individual financial sector.

Another option would be to let market players choose to keep their EU passports, but that would mean a requirement for them to ensure sufficient presence in the EU or provision of services from EU territory, and there are restrictions limiting the outsourcing of such services from the UK, Dombrovskis said. The restrictions have been introduced to prevent the creation of the so-called mailbox companies which are registered in the EU but actually operating in the UK.

The European Commission’s vice president said that financial institutions’ relocation from the UK to continental Europe is being monitored and that many financial sector players have already decided how they will organize their operations after Brexit and which activities will be moved to the EU to ensure uninterrupted business operations.

Valdis Dombrovskis noted at the same time that the European Commission does not project Brexit to leave a major negative economic impact on the EU or the euro area. The Commission expects the EU economy to keep growing by approximately 2 percent a year. The withdrawal from the EU is more likely to have a negative effect on the British economy which already has become one of the slowest-growing in the EU.