Brexit Broadcast – Brexit and financial services - Germany

Video | June 2018 | 05:25

Video Details

Brexit Broadcast – Brexit and financial services - Germany
Simon Lovegrove: Hello everyone, and welcome to our latest Financial Services Brexit video. Today, I'm joined by Martin, a financial services regulatory partner in our Frankfurt office.

Martin, I know you've been very busy with Brexit-related issues. What have you been looking at.
Martin Krause: Yes. Many thanks, Simon. With Brexit coming closer and closer, people getting more and more aware that they need to do something, and so the Brexit world, meanwhile, has a big impact and makes up a great part of our work. There are basically two different areas people are interested in. The first one is to get a licence, in order to prepare when Brexit really gets activated, and the other one is, of course, to see what could be done in a scenario with a Brexit but without a licence, and that is, of course, an issue relevant not only for the UK but an issue worldwide, everyone outside the EU, and the key word is reverse solicitation.
Simon Lovegrove: And can you tell us a little bit more about that?
Martin Krause: Yes, reverse solicitation means the freedom to provide services if you are asked by someone who has approached you without being approached by you before. So, the most prominent example for this is if there is a request by a borrower to a bank -- with a bank -- without a European licence to provide a loan.  So theoretically, the bank would not be permitted to do that, but if requested out of the blue by a potential borrower, the bank may do so, without holding the licence.  That is an example from the banking world, but it applies as appropriate also for all sort of MiFID services, investment advice, brokerage, financial portfolio administration, and so on. And therefore, this is an important instrument for those British players that may be third country players after the Brexit, and so they are also preparing that one, and analysing against that backdrop, does it make sense to obtain a licence, or would it be possible to maintain business in an appropriate manner, even after Brexit, without a licence?  Currently, the British players are within the European Union, and so they are fully authorised to do marketing. And therefore, it may be a clever idea for those to approach the Germany clients, and requesting them to ask them questions after the Brexit is in effect. Because in an ongoing business relationship, it is permissible that, if asked by the German client, the non-European service provider may freely and openly respond to such request, and therefore, continue to offer the services, but it is important to act before Brexit comes into effect, because after that, it would no longer be possible. Right now, that is something that can be done. So, if you act right in time, that may preserve advantages for a long time in the future.
Simon Lovegrove: That's very interesting, Martin, and a moment ago, you spoke about authorisation. And I know the German regulator, BaFin, has issued a statement.
Martin Krause: Thanks for mentioning that, Simon. Indeed, that's a very important issue. So the reverse solicitation is certainly an important thing, but it's not sufficient for all of the players, because there are many that need to solicit Germany clients. And therefore, for them, it's vital to know how to react, and when to react. And the German regulator has just urged people to now submit their applications, if they want to be sure that they can uninterruptedly continue their business once Brexit is in place. And typically you will need six to nine months, in order to complete an approval procedure, and that is already quite a quick one, so there are even 12 months and more that may be needed.  So, it's absolutely vital for people, if they have not already commenced their procedures, to rush now and get things done, to hand in the application to BaFfin, in order to continue work once Brexit is in place.
Simon Lovegrove: Thanks, Martin. That concludes this video. Goodbye.