The European Central Bank (ECB) blasted banks for slow-walking their Brexit preparations, telling them they must move additional staff and resources to the European Union in case Britain leaves without a deal on October 31.
The central bank said that firms have transferred “significantly fewer activities, critical functions and staff” to their EU operations than originally foreseen as part of their plans, according to a statement on Wednesday. The ECB said some banks are falling short of their supervisory expectations and can’t continue to rely so heavily on servicing EU clients from their branches in the UK.
With the Brexit date having been postponed from March, several financial-services firms in London refrained from building up further reserves in the euro area as demanded. The ECB requires banks to hold enough funds to ensure they can absorb potential losses at their European units. Banks in the region rushed to set up subsidiaries in the euro area and negotiated the capital levels required to do so with the ECB.
The ECB’s statement comes as the chances rise that the UK crashes out of the EU with no deal; Prime Minister Boris Johnson has promised to leave October 31, “come what may.” While banking regulators have said that firms are prepared for the disruption that could follow, the EU for months has told firms they need to keep building operations in the 27 remaining member states of the bloc.