EBA欧洲银行-EBA-Opinion-on-Brexit-preparations-28EBA-Op-2018-0529_9页_277kb

Summary of the EBA Opinion on Preparations for the UK's Withdrawal from the EU

Core Content

The European Banking Authority (EBA) issued an opinion on 25 June 2018 regarding the preparations of financial institutions for the UK's withdrawal from the European Union (EU). This opinion is based on Article 29(1)(a) of Regulation (EU) No 1093/2010 and Article 14(5) of the Board of Supervisors' Rules of Procedure. It is directed at competent authorities of financial institutions operating in the UK and the EU27, including the European Central Bank, the Single Resolution Board, and national competent authorities of EEA EFTA States.

The opinion highlights the risks associated with the UK's potential departure without a ratified withdrawal agreement and emphasizes the need for timely and adequate preparation by financial institutions to avoid disruption to their operations and customer relationships.

Main Points

• Legal Basis: The EBA has the authority to issue opinions to competent authorities to promote a common supervisory culture and consistent practices across the EU.
• Scope: The opinion applies to credit institutions, investment firms, payment service providers, electronic money institutions, and creditors/credit intermediaries.
• UK Withdrawal Timeline: The UK notified its intention to leave the EU on 29 March 2017, with the withdrawal scheduled to take effect on 30 March 2019, unless a withdrawal agreement is ratified.
• Risks of No Agreement: If no agreement is reached, the UK will be treated as a third country, and financial institutions may face legal and operational challenges.
• Preparation Expectations: Financial institutions are expected to identify and mitigate risks, including financial exposures, contracts, data transfers, and access to financial market infrastructures (FMIs).
• Regulatory Permissions: Institutions must ensure they have the necessary regulatory permissions in both the UK and the EU27 to continue operations.
• Customer Communication: Clear and timely communication with customers is crucial to prevent confusion and ensure service continuity.
• MREL Eligibility: Institutions must assess the eligibility of their liabilities under MREL rules post-withdrawal and ensure legal certainty.
• Bail-in Recognition: For institutions under the Bank Recovery and Resolution Directive (BRRD), bail-in recognition clauses should be included in new liabilities to ensure they can be written down or converted.
• Monitoring and Follow-up: The EBA will monitor the progress of contingency planning and the effectiveness of the opinion in mitigating risks.

Key Information

• Timeframe for Action: Financial institutions must act promptly, as the timeline for necessary actions is shortening.
• Customer Obligations: Institutions must ensure they meet their obligations to customers, including communication of risks and changes to services.
• Data Protection: Compliance with the General Data Protection Regulation (GDPR) is essential for data transfer and storage considerations.
• FMIs and CCPs: Institutions must identify alternative FMIs and ensure they can transfer to them in case of disruption.
• Regulatory Coordination: The EBA will work with competent authorities to ensure supervisory convergence and support contingency planning.

Recommendations for Financial Institutions

• Risk Assessment: Conduct a comprehensive risk assessment, including financial exposures, contracts, data management, and funding reliance.
• Contingency Planning: Develop and implement contingency plans in a timely manner, taking into account the potential loss of market access.
• Regulatory Compliance: Ensure compliance with EU and UK regulations, particularly regarding MREL eligibility and bail-in recognition.
• Customer Communication: Provide clear, plain-language communication to customers affected by the UK's withdrawal, including options and timelines.
• Outsourcing and Organisational Structure: Avoid operating as "empty shell" companies and ensure that any outsourcing arrangements do not compromise operational resilience.

Conclusion

The EBA's opinion underscores the importance of proactive preparation by financial institutions to mitigate the risks associated with the UK's withdrawal from the EU. It emphasizes the need for clear communication with customers, regulatory compliance, and contingency planning to safeguard financial stability and ensure continued service delivery. The EBA will continue to monitor and support this process through engagement with competent authorities.