UK-based banks looking to maintain their access to the euro zone after Brexit are running out of time and should not count on a deal about a transition period, European Central Bank board member Sabine Lautenschlaeger said today.
With Britain due to leave the EU in March 2019, banks are set to lose their automatic access to the single market and negotiations over a transition period have been slow, raising doubts that a deal would be struck.
"We cannot be sure whether the transition period will really happen," Lautenschlaeger, who is also the vice chair of the ECB's bank supervision arm, told a news conference.
"Banks must be ready for Brexit; it will happen," she said.
"Any bank that wishes to relocate from the UK to the euro area should really have submitted its licence application already/ But if it hasn’t, it should do so by the end of the second quarter of 2018 at the latest."
Eight banks have already taken formal steps to seek a new licence and four others are planning to significantly extend their activities in the euro area, she added.
But Lautenschlaeger said the ECB may be open to granting banks extra time to implement their relocation plans as long as lenders present high-quality and credible plans.
"We won’t tolerate any empty shells," she said, repeating the ECB's long standing guidance.
"Banks must be 'real' banks if they want to operate in the euro area. "We therefore expect incoming banks to be able to produce complete and accurate data on booking models, hedging strategies and intragroup exposures," she stated.