Banks' Brexit plans still need work if they are going to be ready for the UK leaving the EU, according to a powerful member of the European Central Bank (ECB).
Sabine Lautenschlaeger, vice-chair of the board of the Single Supervisory Mechanism, the ECB's bank watchdog, said issues remain in preparations for both UK-based banks trying to access the EU and EU-based banks wanting to service clients in the UK.
"My message to all affected banks is this: don’t procrastinate," she said, speaking at a banking forum in Frankfurt. "No one will wait for you. When Brexit happens you will either be prepared, or not. I advise you to be prepared."
The warning makes even more explicit a newsletter published last week in which the ECB said too many plans were undercooked. It added a warning against “empty shells or letter box banks” used to try to fit into legal loopholes.
Lautenschlaeger today said she will not accept "shell companies, which are overly reliant on other group entities from outside the EU" or any other "inventive set-up".
"To be very clear: that’s not what we want to see," she said. "We expect banks to manage some of their risks locally. They need local staff, and they need local infrastructure."
There is a "mixed" picture of bank readiness, Lautenschlaeger said today. Some smaller banks currently using the UK as their base for European operations are putting off a decision on whether to relocate inside the remaining EU members, while the plans of EU banks wanting to access the UK market are too "high-level", she warned.
Lautenschlaeger also echoed her counterparts across the Channel at the Bank of England in warning that lenders should include plans to deal with derivatives contracts falling through within their contingency plans.