European Banking Authority to be relocated from London to Paris: History of International Financial Centres remains exciting..

Post-Brexit, some of the EU agencies have to be relocated from London to other places. Actually there are just two agencies: European Medicine Agency and European Banking Authority.

European Banking Authority was established in 2011 post Eurozone crisis. Its objectives are:

The main task of the EBA is to contribute, through the adoption of binding Technical Standards (BTS) and Guidelines, to the creation of the European Single Rulebook in banking. The Single Rulebook aims at providing a single set of harmonised prudential rules for financial institutions throughout the EU, helping create a level playing field and providing high protection to depositors, investors and consumers.

The Authority also plays an important role in promoting convergence of supervisory practices to ensure a harmonised application of prudential rules. Finally, the EBA is mandated to assess risks and vulnerabilities in the EU banking sector through, in particular, regular risk assessment reports and pan-European stress tests.

Other tasks set out in the EBA’s mandate include:

  • investigating alleged incorrect or insufficient application of EU law by national authorities
  • taking decisions directed at individual competent authorities or financial institutions in emergency situations
  • mediating to resolve disagreements between competent authorities in cross-border situations
  • acting as an independent advisory body to the European Parliament, the Council or the Commission.
  • taking a leading role in promoting transparency, simplicity and fairness in the market for consumer financial products or services across the internal market.

To perform these tasks, the EBA can produce a number of regulatory and non regulatory documents including binding Technical Standards, Guidelines, Recommendations, Opinions and ad-hoc or regular reports.

The Binding Technical Standards are legal acts which specify particular aspects of an EU legislative text (Directive or Regulation) and aim at ensuring consistent harmonisation in specific areas. The EBA develops draft BTS which are finally endorsed and adopted by the European Commission. Contrary to other documents such as Guidelines or Recommendations, the BTS are legally binding and directly applicable in all Member States.

London was housing European Banking Authority for obvious reasons as it was the leading international financial centre. There must have been some politics over this location as UK is not part of European Monetary Union with ECB headquartered at Frankfurt. Ideally, EBA should have been located in EMU member countries but the location went to London given the international nature of the crisis and banking.

Post-Brexit, several countries were eyeing this relocation (one can see bid documents here).

Paris has won the relocation bid:

The European Banking Authority (EBA) works to ensure effective and consistent prudential regulation and supervision across the European banking sector. Among other tasks, the EBA assesses risks and vulnerabilities in the EU banking sector through regular risk assessment reports and EU-wide stress tests.

EU27 ministers voted on the relocation of the UK-based EU agencies in the margins of the General Affairs Council (Art. 50) meeting on 20 November 2017. The selected location of the EBA is Paris, France.

However, Paris had put up the least attractive offer. Vienna had the most generous and was a favorite as well.

Now Paris will host both EBA and European Securities and Markets Authority or ESMA. This Brexit has given Paris a huge push for its yet another bid for becoming an international financial centre. 

I had blogged in 20 Jun 2016:

Patrick Jenkins has a superb article wondering role of London as a financial centre post Brexit (HT: MR blog).

If there is one activity that the City of London dominates it is foreign exchange trading. Bankers are split over exactly how endangered London’s crown would be in the event of Brexit — the City had been dominant for decades before the creation of the EU. But its continued claim as the world’s principal location for trading the euro — a $2tn-a-day market — looks vulnerable.

The European Central Bank has already attempted to bar clearing houses outside the eurozone from handling the euro. Last year, it failed, thanks to a ruling at the EU’s highest court. But many in the City and in policymaking circles believe the UK only prevailed thanks to its membership of the EU. Outside the gang, it would rapidly be stripped of euro business, they believe. Other connected trading activity could follow.

Paris recently made a bold pitch to woo City of London bankers in the event of Brexit. But, HSBC aside, most banks scoff at the idea that Paris would be a natural venue. Frankfurt, home of the European Central Bank and the financial capital of Europe’s biggest economy, is also problematic. As a small city with a population of less than 700,000 people, it is seen as provincial and unpopular with staff. Dublin is English-speaking and attractive on tax grounds, but it is a relative backwater. The most likely outcome is that foreign banks with large operations in London would shift their staff to a spread of eurozone locations where they already have operations — including Frankfurt, Dublin, Paris, Warsaw and Lisbon. That would fragment the financial services industry in Europe, potentially weakening the continent’s ability to compete internationally.

In insurance, another sector whose European activity is highly concentrated in London, there have been predictions that Asian financial centres, such as Singapore and Tokyo, would steal business from the likes of Lloyd’s of London, the insurance market, if the UK capital could no longer claim special access to Europe.

 

 

Interesting times for financial centres. The political forces keep leading to twists and turns and shaping histories..

 

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3 Responses to “European Banking Authority to be relocated from London to Paris: History of International Financial Centres remains exciting..”

  1. Why Brexit should not stop UK cities from competing for European Capital of Culture.. | Me Stock Broker Says:

    […] Post-Brexit, UK and its cities are losing out to hosting European  institutions and values. Just recently, European Banking Authority exited from London. […]

  2. Why Brexit should not stop UK cities from competing for European Capital of Culture.. – Courtier en Bourse Says:

    […] Après le Brexit, le Royaume-Uni et ses villes perdent à accueillir des institutions et des valeurs européennes. Tout récemment, l'Autorité bancaire européenne a quitté Londres . […]

  3. Changing history of Financial centres: Hong Kong set to lose global IPO crown as New York and Shanghai rise… – Courtier en Bourse Says:

    […] Paris a reçu un coup de fouet dans sa tentative de devenir un centre financier mondial alors que l'Autorité bancaire européenne passait de Londres à la capitale française . La France a longtemps espéré rivaliser avec la Grande-Bretagne sur le contrôle de la finance […]

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