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The European Central Bank has warned the biggest investment banks on Wall Street and the City of London that it has lost patience with their use of ’empty shell’ EU trading desks since Brexit and plans to revamp them. force to move more resources.
The move bolsters the ECB’s longstanding push for major investment banks based outside the EU to increase the staff and capital they locate in their financial markets operations within the bloc, which have started when their European operations were spun off due to Brexit.
Andrea Enria, head of oversight at the ECB, said in a blog post on Thursday that “empty shell structures. . . are a very real concern.”
He added: “The ECB does not set specific targets for the relocation of banking activities to the euro zone. Instead, we want to ensure that incoming legal entities have governance and onshore risk management arrangements that are proportionate, from a prudential perspective, to the risk they generate.
The ECB has completed the first phase of an assessment to determine the extent to which seven international banks are shifting the risk of eurozone operations out of the bloc, in particular to the UK, where many had based their European operations before. Brexit.
The ECB is focusing on eight major banks, one of which has already been covered in a previous assessment. These are JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, HSBC, Barclays and UBS.
Of 256 dealing desks across the seven banks, he found that 70% used back-to-back models, which allow them to clear EU trades with their London entities and effectively manage UK risk. A further 20% have used office sharing, in which they jointly manage EU clients or assets from offices both in the bloc and in the UK.
The ECB’s supervisory chief said he had identified the 56 most important trading desks and would “issue binding decisions” on their parent groups, forcing them to step up operations in the euro zone or face pain. fines.