As discussions on the UK’s future relationship with the EU continue the Bank of England is announcing that it is consulting on an updated approach to authorizing and supervising international banks and insurers, and it is issuing guidance on its approach to international central counterparties (CCPs).
The Bank of England is also publishing letters to relevant firms which set out the Bank of England’s approach to the authorization of those firms so that this process can proceed in an orderly manner.
The foundation of the Bank of England’s approach is the presumption that there will continue to be a high degree of supervisory cooperation between the UK and the EU. On this basis, EEA banks and insurers may (if they are not conducting material retail business) apply for authorization to operate as a branch in the UK. There are expected to be no implications of the proposed policy for the current operations of banks and insurers from non-EEA countries such as the US, Switzerland, and Japan.
The Bank of England, consistent with its long history of cooperation with counterparts in the EU and commitment to an open financial system, intends to proceed on the presumption that a high degree of supervisory cooperation with the EU continues following Brexit.
EEA firms may therefore plan on the assumption that the requirements for equivalence, supervisory cooperation and adequate assurance over resolution will be met, and, provided they are not conducting material retail business in the UK, they may apply for authorization as a branch.
In the event of a non-cooperative relationship, however, there could be implications for how the BoE oversees some EEA firms in the UK.
If the PRA is unable to gain sufficient assurance over the degree of cooperation with the home state supervisor and its oversight of the firm, it may impose specific regulatory requirements at the branch level. If this proves to be ineffective, the PRA would likely authorize the firm only as a subsidiary.
The Bank of England will ensure that the process of introducing the updated policy is an orderly one.