- BaFin President Felix Hufeld said: “Whatever the outcome of Brexit is going to be, it will cost a price, both for British consumers, as well as EU27 consumers.”
- Hufeld says EU regulators won’t tolerate “empty shells or letterbox models” from financial services in the EU post-Brexit.
LONDON — Germany’s most senior financial regulator believes Brexit will push up the price of financial services in both the UK and Europe.
Felix Hufeld, the President of German regulator BaFin, said at an event on Tuesday: “It is crystal clear in my mind that whatever the outcome of Brexit is going to be, it will cost a price, both for British consumers, as well as EU27 consumers. That is very clear.”
Hufeld said there is a “vast economic dependency” between UK and EU that will be disrupted by the pair’s “historic divorce.”
Hufeld said BaFin and other EU regulators would not tolerate “empty shells or letterbox models,” meaning banks will have to set up fully regulated, functioning subsidiaries in Europe post-Brexit. This must include independent processes and management oversight, as well as IT systems.
This will inevitably be costly. The Association of Financial Markets in Europe (AFME) estimated in June that a “hard” Brexit could cost UK banks €15 billion (£13.1 billion) and add €40 billion (£35 billion) to tier one capital requirements.
These costs would most likely push up the cost of services — everything from loans to insurance. Bruegel, a European economic think tank, estimated in February that Brexit could push up European borrowing costs by as much as €12 billion a year.
“The cost of doing business will go up, certain costs for consumers may go up — it’s more difficult to predict precisely — but the assumption that it’s going to be a cost-free incident I find completely unrealistic,” Hufeld said.
“It does show the degree of interaction and the benefits of being in the EU have been underestimated by many people. We all will pay a price for that.”
Asked to estimate just how much Brexit may cost banks and other financial institutions, Hufeld said it is too early to tell.
He said he was in close communication with colleagues across Europe to ensure regulators are prepared for whatever the outcome of Brexit happens to be, saying his key goal was to ensure financial stability.
Hufeld was speaking in London at an event organised by specialist financial service consultancy Zeb.
Business Insider Emails & Alerts
Site highlights each day to your inbox.