On 23 June 2016, the British in their referendum on whether or not to remain in the European Union by a narrow but clear majority voted to leave the EU, the so-called Brexit. As one consequence, the British government is now expected to address a notification of withdrawal to the European Commission in the foreseeable future, triggering a two-year period of negotiations on the exit and its terms.
Will European Passporting continue to be possible with Britain?
How future relations between the United Kingdom and the EU will be organized is largely open. However it is clear that Britain’s participation in the European Single Market will have to be redefined. This means that all simplifications that exist under supervisory law and are presently summarized under the term of “European Passporting” are also at risk. We already reported on this issue in our article of 31 March 2016.
Passporting enables companies, whose business purpose is basically subject to the financial market supervisory authorities of the individual states, to dispense with the requirement to obtain authorisations in each of the EU member states if they have an authorisation from a financial market supervisory authority of one member state. Many banks and financial service providers make use of this option.
FCA authorization without access to the European Single Market
Due to the great attractiveness of the financial centre of London many of these companies have opted for an authorisation from the British Financial Conduct Authority. The considerably more liberal authorisation process in Britain as compared with other European supervisory authorities certainly contributed to this decision. By leaving the EU, an FCA authorisation will no longer replace an authorisation obtained in a European member state. Companies that only have a British authorisation would no longer have access to the European Single Market. Presently, it is completely impossible to predict whether or not the EU and the United Kingdom will agree on a comparable arrangement to replace the passporting system.
Banks and financial service providers wishing to avoid this kind of uncertainty and the related entrepreneurial risks are hence well advised to address the issue right now and apply for an authorisation in one of the remaining European member states.
FCA authorization vs. BaFin authorisation
In this context, an authorization from the German Federal Financial Supervisory Authority (Deutsche Bundesanstalt für Finanzdienstleistungsaufsicht; “BaFin“), which has an excellent international reputation, may be interesting. Furthermore, the Frankfurt and London stock exchanges continue their talks on a possible merger, which in addition to the location of the European Central Bank, would be another advantage for the financial center of Frankfurt. One thing is certain: After the Brexit, Frankfurt/Main will continue to gain in importance as a European financial center.
Our expert attorneys will be pleased to advise your company on an application with the German supervisory authority BaFin, whether you need an authorisation as a bank or as a financial or payment services provider. We are looking forward to being contacted by you.