The European Union’s financial-markets regulator sought to stop the bloc’s member states from loosening oversight to attract business after Brexit, warning that firms shouldn’t be allowed to set up shell offices in the EU that still conduct critical business in London.
Bloomberg News reports that The European Securities and Markets Authority on Wednesday published guidance to the 27 countries that will comprise the EU after the U.K. quits the bloc in an effort to root out “supervisory arbitrage risks” that could result if consistent and rigorous standards aren’t maintained. These are necessary to prevent entities from setting up “letterbox entities” in an EU country that in reality outsource or delegate significant business to London.
“The U.K. plays a prominent role in EU financial markets and the relocation of entities, activities and functions to the EU27 creates a unique situation requiring a common effort, at EU level, to safeguard investor protection, the orderly functioning of financial markets and financial stability,” Steven Maijoor, chair of ESMA, said in a statement.
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