Brexit: ESMA highlights importance of supervisory convergence

08-06-2017

On 31 May, ESMA published an Opinion (focused on entities that are subject to the AIFMD, UCITS and MiFID regimes), highlighting the “unique situation” presented by the likely relocation of many of those financial services providers currently based in London to the other EU Member States in advance of Brexit.  ESMA is concerned that competition between jurisdictions could lead to regulatory arbitrage, and this mirrors the concerns expressed by the European Central Bank in its recent comments aimed at banking groups considering relocating to the euro area.  In addition to its concerns regarding regulatory arbitrage, ESMA is concerned that, unless parameters are set for national competent authorities in the EU27 Member States, relocations could lead to a prevalence of “letter-box entities”.

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