FRANKFURT/LONDON, Oct 22 (Reuters) - Germany’s financial watchdog, BaFin, said on Monday it would negotiate its own regulatory ties with its British counterpart to avoid market disruption if Britain and the European Union fail to reach broader agreements before Brexit.
EU financial regulators are hoping to agree multilateral memorandums of understanding (MoUs) with Britain’s Financial Conduct Authority to avoid a disorderly Brexit wreaking havoc.
But progress on that broader effort partly hinges on whether and when Britain and the EU agree final terms of a divorce settlement and the outline of future trading terms before Brexit in March. An EU summit this month failed to secure agreement on these.
In the first sign that a national regulator in the EU was leaving nothing to chance and is willing to go it alone, BaFin’s deputy president, Elisabeth Roegele, said the watchdog was examining fall-back scenarios.
Those could include a bilateral agreement between BaFin and UK regulators to “ensure the smoothest possible transition,” she said.
Britain and EU regulators are trying to agree deals on a wide range of areas to allow funds in one country to be managed by staff in another country, and to clear the way for other forms of outsourcing and the transfer of risks between operations in different countries.
Roegele said EU and UK regulators should agree at an “early stage” on a procedure for consultation, cooperation and exchange of information in the field of securities trading.
“Such a commitment to transparency, market integrity and investor protection serves to ensure the smooth functioning of financial markets and financial stability and to maintain the necessary confidence of market participants, especially investors,” she said in a statement.
Banks have said that Brussels is dragging its feet on agreeing regulatory cooperation agreements in order to pile pressure on lenders to staff new hubs in the EU before March and shift the contracts to them.
The chairman of France’s markets watchdog AMF, Robert Ophele, had said that cooperation agreements for supervising cross-border asset managers will be in place before Britain leaves the European Union next March.
“This type of MOU is very easy to write. We have them with many many countries and they all look the same,” he had said. (Reporting by Huw Jones and Arno Schuetze Editing by Andrew Heavens)