Here we go again.
Tougher demands by European Union regulators may force banks to shift more jobs to Frankfurt, Paris and Dublin than originally planned due to Brexit, a senior City executive has warned.
Tracy Clarke, Standard Chartered’s CEO for Europe and the Americas, said the bank has been waiting nearly nine months for EU officials to approve an operating licence that will turn its Frankfurt branch into a subsidiary, but regulators have yet to make a decision.
Clarke told the Press Association that German regulators, the European Banking Authority and the European Central Bank (ECB) have become increasingly strict, delaying a licence approval the bank expected in the spring.
“Because we were one of the first (to apply for a licence) there was no precedent for us, or for them. It’s been a learning process on both sides.”
Clarke said that while dialogue was constructive, she added: “They’re getting firmer about what they expect to see, and their stance is therefore becoming a bit tougher.”
The ECB has rejected attempts by banks to establish brass plate operations, telling banks they must move significant operations to the EU to sell their services inside political bloc.
It now expects banks such as Standard Chartered to create a dedicated outsourcing unit which will have “real teeth”, Clarke said.
Standard Chartered, which has customers across Europe, but operates mostly in Asia, is trying to navigate rules around how they outsource tasks across its own subsidiaries.
“We expect that onshore in Germany there will be very strong oversight on anything of any service that is performed offshore,” Clarke said.
Ultimately, it means banks such as Standard Chartered may end up moving more jobs due to Brexit than originally planned.
“For us, it still won’t be hundreds more people because of the size and scale of our business, so you might be talking about a few more for us. But if they’re taking this approach with all other banks who are much bigger than we are in terms of their European business, that could be more significant,” she warned.
Clarke, who is also chief executive of Standard Chartered private bank, explained that staff dedicated to activities such as trade finance processing or document checking currently sit offshore in some of Standard Chartered’s business hubs in the likes of Chennai, Kuala Lumpur or Tianjin.
“We rely on that in our global business model, we rely on shared services a lot – either for expertise or for efficiency. So they’re not against that, but there is lots of scrutiny on it,” she said.
The ECB, which regulates euro area banks, said it was keen to prevent UK institutions from creating empty shells when granting licences ahead of Brexit.
A spokesman said: “To this end, the ECB will focus on five key areas when assessing licence applications, namely to ensure that subsidiaries have adequate local management capabilities, some access to financial market infrastructures, some hedging and trading capabilities, do not fully rely on intra-group booking and hedging strategies and can provide accurate data on their local activities.”
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