German central bank’s Dombret on the future relationship between Germany and the UK in finance after Brexit

Excerpts from speech by Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank, 8 February 2018.

Some have voiced the concern that warnings from European officials towards businesses, including financial institutions, currently operating out of the UK to prepare for a hard Brexit could be an attempt to lure business and jobs to the EU27. I want to make crystal clear that this is not our intention. From the day after the referendum I have repeatedly emphasized that we are not the marketing agency for the city of Frankfurt – or any other European financial center, for that matter.

We are supervisors interested in the stability and smooth functioning of the financial sector. And as long as there is no deal on future relations, no divorce deal and not even a reliable and consistent declaration of intent, we have no other choice than to warn financial institutions of the risk of being caught unprepared. This would not be in the interest of either the EU or the UK. Whatever political decision is taken, bank supervisors will not only do all they can to make the transition to a new regime as smooth as possible; they will also, in the long run, try to reduce unnecessary inefficiencies where possible.

In December last year, the PRA published a draft proposal for a post-Brexit supervisory approach. I very much appreciate the spirit behind this approach. It reflects a solution-oriented, pragmatic, yet stability-oriented approach. In the same vein, the SSM has developed quite pragmatic, cooperative “policy stances” on many of the relevant issues. I am confident that this cooperative style can be an important contribution towards a smooth transition.

The point of reference for future regulatory alignment has changed since the Brexit vote. It used to be the single market and passporting; now it is trade agreements with third countries that do not accept the EU’s legal jurisdiction. The free exchange of workers and services will tend to be very limited under these scenarios. It is imperative to accept this new political point of reference, because the old one has somewhat lost its democratic legitimacy.

The tasks that come with this new reality are unchartered territory for all of us. But, irrespective of the framework, it is important that we work together to find pragmatic solutions that sustain the strong links between our economies and financial sectors. I am confident that, even without a financial services agreement, our economies and financial sectors will remain closely integrated.

Read the full speech

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