It appears that many European financial services firms are not interested in continuing to be authorised in the City, as only half of EU firms that were given a temporary license to operate in the UK – immediately after Brexit – have applied for full authorisation, a Freedom of Information request has revealed.
The City watchdog, the FCA, had set up a temporary license regime in the months before Brexit, in order to give European Union-based firms the opportunity to continue trading in the City while final rules and regulations were worked out.
The temporary license, dubbed ‘landing slots’ were created to support firms that were passporting into the UK before Brexit and it was agreed they continue to operate if they applied for full authorisation from the FCA or the PRA.
However, Financial News found out that only half of the firms that were awarded landing slots did indeed apply for full authorisation in Britain, implying there is little or no appetite among some firms to remain active in the UK.
Even after the FCA wrote to dozens of firms over the summer, applications reportedly did not increase. On 30 September the window closed, with only 39 out of 72 firms that were expected to apply actually doing so.
This means that 46 per cent did not apply to the FCA, significantly higher than the regulator’s initial expectation of about 20 per cent.
Access to UK market
One explanation may be that some European firms may have had passporting permissions that they were not actually using, according to Esrar Moitra, a former FCA staffer who works for compliance consultancy firm Braithwate.
“Firms that are headquartered in Europe have found that they can actually branch into the UK rather than having to set up licensed UK entities, and many have gone down that route so that will definitely have diminished some of the numbers.”Niki Beattie, founder and CEO of Market Structure Partners
“Possibly it is ominous for the UK because the differential is quite large,” Niki Beattie, founder and CEO of Market Structure Partners, which advises companies on capital markets infrastructure issues, told Financial News.
“Going down the branch route helps companies save capital and have a lighter touch on governance. Perhaps you could interpret this as the UK having less reach in future — companies are doing business here but not being headquartered here.”