An Opinion setting out recommendations for banks, investment firms and other financial services firms considering a move to an EU member state post-Brexit has been published by the European Banking Authority (EBA).

The EBA guidance aims to ensure the consistent application of EU legislation in the lead up to Brexit, and covers matters relating to authorisations, the prudential regulation and supervision of investment firms, internal models, outsourcing, internal governance, risk transfers via back-to-back and intragroup operations and resolution and deposit-guarantee schemes.

With regard to corporate governance, said Robert Cain, partner at Dublin law firm Arthur Cox, the Opinion makes it clear that national competent authorities (NCAs) should establish the suitability of members of the management body and the amount of time they will dedicate to their roles, and check whether there is a sound and effective governance regime in place.

Outsourcing

“Outsourcing should not be allowed if it would result in an ‘empty shell’,” he said. “Where outsourcing is allowed, that outsourcing should be monitored and managed by the firm, and the NCA should have full access to all information that it needs.”

Cox added: “NCAs should assess outsourcing models on the assumption that the UK will be a third country (if activities will be outsourced back to a UK part of the group). Counterparty credit risk and other material risks should be carefully monitored where firms are transferring risk on a back-to-back or intragroup basis.”

Focused on the period before the UK’s departure from the EU, the Opinion calls for: existing legal and regulatory framework to be applied consistently throughout the EU, with competition on regulatory or supervisory standards to be avoided; NCAs to avoid imposing unnecessary regulatory burdens on firms, while maintaining regulatory standards; and cooperation between NCAs and resolution authorities to be upheld now and in the future.

In each of the specific areas identified by the EBA, the Opinion sets out key principles, followed by specific detailed technical guidance addressed to firms and authorities. A report is appended to the Opinion setting out the detailed analysis underlying the guidance provided.