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Bundesbank Doesn’t See Financial Stability Risk From Hard Brexit

Bundesbank Doesn’t See Financial Stability Risk From Hard Brexit

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Germany’s Bundesbank doesn’t see risks to the country’s financial system from the U.K. leaving the European Union, even if politicians fail to strike an exit deal.

“There is no playbook and no experience for a thing like Brexit,” said Joachim Wuermeling, a board member at the central bank. “But as of today I do not expect a risk for financial stability even in the case of a hard Brexit.”

Wuermeling, who oversees banking supervision at the Bundesbank, said a bottleneck in the supply of financial services or even a credit crunch was unlikely. “The vast majority of financial services and products should still be available on the continent even after Brexit,” he said in a speech in Frankfurt on Wednesday.

Banks and their regulators have “more or less” completed preparations for a hard Brexit, said Wuermeling, who is also a member of the European Central Bank’s supervisory board. The uncertainty of how the U.K. will leave the EU has prompted banks to wait until the last moment to transfer assets, he said.

Financial firms setting up or expanding EU units plan to quadruple the size of those operations by adding about 637 billion euros ($705.5 billion) of assets, according to Wuermeling. The 11 biggest lenders supervised by the ECB are set to transfer 1.1 trillion euros of assets, he said.

Wuermeling also said:

  • About 2,000 finance staff will be transferred from the U.K. or recruited in Germany as part of a first wave following Brexit
  • The ECB has handled 22 Brexit-related licensing procedures, of which eight were for Germany but one “probably won’t be pursued”
  • A further 10 applications were received from banks seeking to expand business under the ECB’s watch, three of which were in Germany
  • Germany has finalized all nine of its applications for investment firm licenses, out of 41 for the wider EU.

“This is only a snapshot for day one and certainly not the end of the story,” Wuermeling said. “The figures may further develop depending if a hard Brexit will happen or not and how the future relationship between the U.K. and EU will be shaped. Much more business may be transferred along the road – depending on individual decisions of the banks and their clients.”

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Marion Dakers, Keith Campbell

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