Wednesday, December 14, 2016
Spain is officially changing regulation to steal business from London post-Brexit
Spain is unleashing a range of new measures to make it easy for businesses to relocate from London to Madrid in a bid to take business away from Britain post-Brexit, says the country's financial regulator.
The measures include allowing companies to submit all their documents in English, fast-track authorisation for financial companies looking to relocate, as well as promising that the country will not impose any regulatory requirements beyond those set out by the European Union.
The Comisión Nacional del Mercado de Valores (CNMV), Spain's financial watchdog, confirmed in a statement that it is ready to try and make Spain more desirable for companies thinking of relocating from London in the likelihood that the City would lose its financial passporting rights.
"In this context, the CNMV is ready to welcome UK-based financial institutions that wish to locate their business in Spain as a result of Brexit," it said.
It also added that it was "determined to contribute to making Spain the most appealing option for investment firms considering a move from the UK to another EU country."
The loss of passporting rights following Brexit is one of the biggest fears in the City of London. If the passport is taken away, then London could cease to be the most important financial centre in Europe, costing the UK thousands of jobs and billions in revenues. Around 5,500 firms registered in the UK rely on the European Union's passporting rights for the financial services sector, and they turn over about £9 billion in revenue.
So this is why, if there is a "hard Brexit" — leaving the EU without access to the Single Market in exchange for complete control over immigration — or a strong indication that one may happen, firms are likely to relocate.
On Tuesday, a partner at a massive asset manager warned that the longer it takes for Britain to trigger Article 50, and thereby start the formal two-year Brexit negotiation talks, the more likely it is that companies will "postpone business investment decisions ... or, worse, speed up decisions to relocate some operations outside."
Current EU law allows European banks to operate branches in the UK that do not need to be separately capitalised from the parent company abroad. Similarly, non-EU banks, such as those from the US or Asia, can use their London subsidiary to sell services to clients across the EU. This has allowed London's financial centre to act as a hub for global firms looking to do business in the EU.
However, if London loses financial passporting, it will mean many places will look to relocate its operations.
Madrid is competing with Frankfurt in Germany and Paris in France for financial company relocations.
Earlier this month, France's chief financial regulator said some international banks are already in the process of opening up new subsidiaries in Paris in the wake of Brexit.