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The possible future location of the London based European Banking Authority post-Brexit was discussed at a hearing of the European Parliament’s Economic and Monetary Affairs committee attended by the three heads of the European Supervisory Authorities. During the hearing MEPs also raised questions about the quality of bank stress tests and the prospects for legislation on packaged retail and insurance-based investment products (PRIIPs).

The Chairman of the European Banking Authority, Andrea Enria, called for a swift decision on the relocation of the Banking Authority following the Brexit vote. Mr. Enria said a decision should be made “within a relatively short time frame” as the uncertainty surrounding its future location was raising “significant concerns among the staff.”


EBA’s work post-Brexit


The chair of the EBA pledged that the decision-making process at the agency would not be disrupted in the wake of Brexit, but noted that at a recent away day some staff members had raised questions about the role of UK representatives and the status of their votes closer to the date of Britain’s withdrawal from the European Union.  The European Council and the European Parliament must now decide on the EBA’s new home.


Despite the UK’s vote to leave the EU, progress must continue on the Capital Markets Union, stressed Steven Maijoor, Chairman of the European Securities and Markets Authority (ESMA). “Whether there are 27 or 28 members, there should be no pause at all.  It is important to move forward,” he said.


Differences over Priips


The EIOPA Chair, Gabriel Bernardino, also expressed optimism for the future of the legislation on PRIIPs. Earlier this month, the European Parliament rejected the regulatory technical standards (RTS) related to PRIIPs and sent the proposals back to the European Commission for revision, but Bernardino said he believed those differences could be overcome.


“We believe that the work that we have been developing in joint committee guidance (...) can be of great help to adjust and clarify some provisions of the RTS to overcome those concerns [of the European Parliament],” he said.


Stressing the bank stress tests


Andrea Enria also rejected criticisms of the EBA’s stress tests for European Banks in the face of claims by US academics that they vastly underestimate the capital shortfalls among the 51 EBA-tested banks. He said the robustness of the tests depended on how high the regulators selected to set the bar.


“If you want to set the bar higher, then you have to raise the leverage ratio, but I believe [the EBA stress tests] strikes the right balance between safety and the encouragement to lend.