Germany Calls on Banks to Help Prevent Brexit Fallout on Markets

(Bloomberg) -- Germany’s market watchdog wants banks to help it ward off turmoil if the U.K. leaves the European Union without a deal.

“We expect maximum efforts from all affected firms to continue their business with as little disruption as possible,” said Felix Hufeld, the president of BaFin, as the supervisor is known. As the clock ticks down to Brexit day at the end of March, regulators and banks are working to prevent financial markets from seizing up if U.K.-based firms lose the ability to service contracts with EU clients.

The German watchdog is taking an active approach to maintaining access for its big companies to global financial markets and has even broken ranks with European institutions on occasion. Hufeld, like his counterparts in the U.K., wants banks to spend the time and money preparing for Brexit, but recognizes that the task is too large for the firms to manage alone.

To that end, the German government is giving BaFin the ability to grant firms temporary licenses to carry out contracts in the event of a so-called hard Brexit. Hufeld says he’s confident that those powers, which would run until the end of next year, would work as intended. The German Finance Ministry presented a draft law on Brexit last month, and parliament will probably decide on it in February, he said in a speech to reporters in Frankfurt on Tuesday.

More than 45 U.K. financial firms that operate in the EU are establishing or expanding their presence in Germany to retain access to the bloc, according to Hufeld. That shows confidence in BaFin, he said.

Hufeld also said:

  • He supports planned requirements for EU banks to hold capital equivalent to 3 percent of their assets, calling that a “measured figure”
  • Financial supervisors should monitor the behavior and effects that large technology companies like Alphabet Inc. and Amazon.com Inc. have on markets, but “certainly not supervise the companies as a whole”
  • European institutions need to do a better job of coordinating their efforts to combat money laundering, and recent steps in that direction are welcome
  • Some pension funds need to do more to weather the low interest-rate environment if they are to provide the services they promised
  • A change in interest rates could exacerbate economic and real-estate risks

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