LONDON The European Union’s securities watchdog has published guidance to stop national supervisors from competing unfairly with each other to woo financial firms in a post-Brexit rush from Britain.
Dublin complained to Brussels that rival financial centers were offering a “back door” to the EU’s single market through lax rules.
In response to such concerns, the European Securities and Markets Authority (ESMA) said on Wednesday that national regulators need to prepare for greater demand for licenses as financial firms in Britain seek to relocate to an EU of 27 countries after Britain’s departure in 2019.
Britain is the EU’s biggest financial market and firms there may need to shift operations to continue serving customers within the bloc.
“The EU27 have a shared interest in building a common approach to dealing with relocating firms that wish to continue to benefit from access to EU financial markets,” ESMA Chairman Steven Maijoor said in a statement.
“Firms need to be subject to the same standards of authorization and ongoing supervision across the EU27 to avoid competition on regulatory and supervisory practices between member states.”
The guidance is non-binding but has the backing of ESMA’s board, making it harder for a member state’s regulator to ignore. Securities regulators authorize mutual funds, hedge funds, investment firms and trading operations.
The guidance sets out nine principles that tell regulators to start from scratch when asked for a license by a British financial firm.
There should be “no automatic” recognition of authorizations granted by UK regulators, ESMA said.
This contrasts with the European Central Bank (ECB), which will accept UK authorizations for parts of a bank for a certain period to speed up licensing.
ESMA said that regulators should not authorize “letter box” entities that have few staff or operations. Outsourcing or delegation of operations to Britain should be…