After the UK referendum, EU member states made a number of announcements in the hope of increasing their share of asset management business as a result of Brexit.
The asset management industry has a mountain of work to do to prepare for the UK’s departure from the EU. Some UK firms are making arrangements, but others are only just thinking through the potential consequences. Meanwhile, other member states are moving quickly to gain advantage.
Competition is fierce. France, Germany, Ireland, and Spain are amongst some of those who have repositioned themselves in the hope and expectation of dealing with more applicants for entry.
In October last year, the Autorite des Marches Financiers (AMF), which regulates France’s financial markets, unveiled a new program to help foreign investment managers navigate the authorisation process.
They declared that existing application documents already approved by the UK regulator are sufficient, without the usual need for additional French-specific documentation. They also committed to providing an English-speaking point of contact to help all applicants through the process. The new measures allow firms to begin opening offices in France in just two weeks.
Germany is currently considering changing its labour laws to make Frankfurt a more attractive hub for investment managers and other financial services firms looking to move staff out of London. One German website, which went live immediately after the UK vote, reads “Welcome to FrankfurtRheinMain” and offers a 24-hour UK-based hotline for companies thinking of opening an office in the area.
Closer to home, the Irish regulator has stated its commitment to transparency, consistency and predictability in its approach to authorisations and has made a considerable amount of information on Brexit-related authorisations publicly available.
Ireland’s central bank is said to have seen a “material increase” in the number of authorisation queries from UK firms looking to establish a presence in Dublin.
In December 2016, Spain launched a “dedicated welcome programme” designed to attract UK asset managers and other financial services firms. Like France, it plans to create a single contact point for applicants. Spain plans to provide and accept documentation in English, and establish a two-month fast-track authorisation process for UK firms.
The European Securities and Markets Authority (ESMA) has urged EU national regulators not to compete on regulatory and supervisory treatment. It is investigating risks of “regulatory arbitrage”, whereby national regulators try to attract jobs and tax revenue by offering lighter regulatory supervision.
It has now issued a set of principles to foster consistency in authorisation, supervision and enforcement of entities, activities and functions relocating from the UK.
And yet despite the speedy reaction of official bodies around Europe, few asset managers have yet announced their Brexit plans.
Regardless of political rhetoric, the UK is leaving the EU, and whether it is “hard”, “soft” or somewhere in between, firms need to plan to ensure their customers remain protected. Some firms are now recognising that they may need to relocate some portfolio management functions and are working to assess their options and take steps to future-proof their businesses. But more needs to be done.
The EU is preparing to take advantage of Brexit. The UK industry had better be ready.