FCA Warns Banks on Brexit

By The Enforcd Team

As banks prepare to move clients and operations into the EU, the FCA has warned them that they may be exposing their clients to added costs and risks.

The closer to Brexit we get the more uncertain things seem to be. With Theresa May’s Withdrawal agreement struggling to make it through the Commons all options now seem to be on the table. Such uncertainty is like Kryptonite for banks and it’s understandable that so many have made noises about moving clients and some operations overseas. However, the FCA has issued some clear warnings for those thinking about doing so.

Several leading banks have made noises about transferring some of their EU clients to European subsidiaries after Brexit. RBS, for example, has applied to EU clients of its NatWest Markets business to its Dutch subsidiary as part of its contingency plans for a no deal Brexit.

Others have also set up subsidiaries within the EU to ensure they can continue to service their clients in the same way, even if there is a no deal Brexit. Bank of America has moved its banking and markets operations in Europe from London to Dublin, Barclays has shifted jobs to the continent and HSBC has said it could be moving parts of its business to Paris.

Stark warning

It’s understandable why EU clients would want to move, but the FCA has stepped written to several major banks warning them against moving some clients unnecessarily. A letter, signed by Meghan Butler, warned banks to only make the minimum changes required and that they were “prepared to intervene where we see steps being taken which could expose clients or markets to unacceptable risks.”

The regulator has confirmed that it sent the letters. In a statement it said:

“We have emphasised to firms that we expect decisions taken by them in relation to EU withdrawal to be consistent with our statutory objectives, which includes the interests of their clients.”

Their fears are particularly focused on non EU clients who may be moved out of the EU without their consent. It makes sense of Banks to move clients in bulk, which could see some clients packaged up and moved alongside EU clients. The regulator says it wants to ensure those clients understand the implications of the move and are not opened up to any additional uncertainties or risks. In other words, they still expect banks to comply with their obligations of considering the good of their customers rather than what is good or convenient for them.

The move is one of a number of interventions coming from the FCA over Brexit in recent weeks. As well as updating its contingency planning for a no deal Brexit it has also signaled its wish for a transition period to be as short as possible.

As ever there are those who accuse the regulators of turning political and putting pressure on banks ahead of the UK’s eventual exit from the EU. The regulators, though, say they are simply fulfilling their obligations to act in the best interests of consumers. The strong wording of the letters and the fact that they say they are prepared to take positive action should be enough of a signal to anyone to take these announcements seriously.