France, Germany Battle to Host EU Finance Regulator Post Brexit
May 18 2017 - 7:59AM
Dow Jones News
By Julia-Ambra Verlaine and Patricia Kowsmann
LONDON--France is shooting down the possibility of relocating
Europe's top financial regulator to Frankfurt from London after
Brexit, an early sign of infighting over the spoils of Britain's
departure from the European Union.
Frankfurt had emerged as the favored location among EU officials
for when the European Banking Authority moves from the U.K. after
Brexit. But the agency has been caught in a Franco-German power
struggle over which country inherits London's financial-services
crown once the U.K. leaves.
Countries from Portugal to Denmark are fighting to host the two
EU institutions now based in London. The hottest prize is the
European Medicines Agency, which attracts thousands of experts a
year for its meetings and employs almost 900 staff. France is
seeking the EBA as it tries to fashion Paris as the bloc's next
financial center.
While the EBA is much smaller, its presence in Frankfurt would
consolidate the city's status as a financial hub. Earlier this
month, Germany's financial watchdog said a double-digit number of
banks have indicated that they will move some of their staff to
Frankfurt following Brexit.
Because of the French objections, talks among the continent's
capitals to move the banking regulator have taken a new turn, and
now both Paris and Frankfurt are likely to be out of the picture
because of the political controversy that comes with choosing
either, according to officials familiar with the discussions.
The French opposition to Frankfurt as the EBA's location emerged
under former president, François Hollande. But European officials
don't expect the country's new president, Emmanuel Macron, to shift
ground on the question, though they haven't received any indication
one way or another.
This all leaves the EBA and its more than 150 staff in
uncertainty as to where the agency will move. Brussels and Vienna
have been tapped as the best next options.
The fight is an example of how, as Brexit negotiations unfold,
competition is likely to intensify among the 27 other EU
capitals.
European nations are looking to lure businesses and authorities
that have to leave the U.K. While some acquisitions are symbolic
and matters for national prestige, there are economic benefits.
Hosting a regulator means more money for a city's restaurants and
an increase in hotel reservations as bankers, lobbyists and
officials fly in for monthly board meetings.
There have been no formal EU proposals over where the EBA and
EMA ought to be located. Talks are taking place among the EU27 and
will likely be decided at a summit of European leaders after a
series of behind-the-scenes discussions.
Germany hasn't given up on the prospect of moving the EBA to
Frankfurt. Officials say the European Central Bank would also
support moving the bank regulator to the same location as its own
eurozone bank supervisor, known as the Single Supervisory
Mechanism.
The situation creates difficulties for Andrea Enria, chairman of
the EBA, who will have to deal with relocating staff and making new
hires. Moreover, any lease for the agency's new headquarters needs
to be approved by the European Parliament and the member states, a
process that can take up to a year, officials say.
The EBA would have to be out of its Canary Wharf offices by
March 30, 2019.
Europe's executive arm, the European Commission, has no say in
where the EBA will move, despite putting forward proposals before
summer that will retool the bloc's supervisory architecture. The
commission is considering merging the banking regulator with the
EU's insurance regulator, currently located in Frankfurt, which
made the German city a logical fit to host the EBA.
Brexit spurred the commission to revisit whether the EU's
supervisory architecture needed to be tweaked. Born out of the
financial crisis, the EU's supervisory system consists of three
agencies to oversee insurers, banks, and markets, and is fairly
young.
Because of national sensitivities, the bloc's three regulators
were split between Paris, London, and Frankfurt. Now Brexit has
thrown the balance of power back into question.
Some officials say handing the EBA to Paris would go against the
principle of fairly distributing authorities around the bloc.
France already hosts the European Securities Markets Authority in
Paris and the European Parliament is in Strasbourg.
Write to Patricia Kowsmann at patricia.kowsmann@wsj.com
(END) Dow Jones Newswires
May 18, 2017 08:44 ET (12:44 GMT)
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