Spanish financial regulatory body Comision Nacional del Mercado de Valores (CNMV) said on Monday it is ready to welcome UK-based financial institutions that wish to locate their business in the country as a result of the Brexit vote from earlier this year.
The UK voted on 23 June, 2016, to exit the European Union (Brexit), causing markets to experience deep volatility and the British pound (GBP) to fall sharply on the Euro (EUR) to its lowest in more than 30 years. Financial institutions across the EU, and in the UK in particular, are facing significant challenges as a result of the Brexit vote. A license issued by UK’s Financial Conduct Authority (FCA) currently provides admission to all countries in the European Economic Area (EEA), but soon FCA license holders will loose access to these markets.
The Spanish regulator has prepared a dedicated welcome program that would facilitate the transitioning process from the UK regulatory framework to the Spanish one. It plans to approve advanced internal models for the determination of capital need that some companies use, as well as to allow the outsourcing of some functions, but only after entities meet certain requirements.
The new measures are not aimed just for entities transferring from the UK, but could also benefit companies in general. They are expected to make Spain a more attractive place for financial companies seeking a regulatory destination.
“The CNMV is determined to contribute to making Spain the most appealing option for investment firms considering a move from the UK to another EU country; to this end, CNMV will implement a special programme to facilitate and guide them through the appropriate authorisation process and a number of measures to ensure that the se firms will encounter a supervisory environment that is welcoming but also sensible and sound,” the regulator said in a statement published on its website.
The CNMV’s dedicated welcome program includes a two-week fast-track authorization process and a single-contact point that would serve license applicants. The fast-track procedure is applicable to cases where the competent supervisory authority has previously reviewed and authored the adequacy of the model to the requirements.
The CNMV will assess applications and provide full authorization within two months after pre-authorisation, provided that the application is duly completed and applicants meet the mandatory requirements. Submission of documents can be executed via electronic signature.
The Spanish regulator has made all relevant documentation, including standardized forms and detailed instructions, available in English and will accept applications in English without the need of translation. Moreover, it will accept pre-existing documents available in English already submitted by the applicants to another competent authority in the EU and will, in some instances, rely on previous decisions by such authorities.
To facilitate the application and licensing process, CNMV is providing English-speaking couches that would guide companies through the Spanish authorization process. These couches will continue helping and monitoring companies for a 6-month period after they obtain a CNMV license.
As mentioned, the CNMV will approve and supervise use internal models for the determination of capital needs to cover counterparty and market risks. The regulator said it is reinforcing its own resources and capabilities in this field and has established a specific cooperation scheme with the Bank of Spain to ensure that the relevant tasks can be carried out smoothly and adequately henceforth. The regulator has agreed on the move since some entities have expressed interest in using advanced internal models capabilities.
As for outsourcing capabilities, CNMV licensees will be able to outsource functions or activities, which may facilitate partial relocations on a rapid basis. However, entities need to show that “the relevant Spanish entity is not a totally empty shell and the outsourcing scheme complies with the MiFID requirements“. The regulator will ensure rhe outsourcing firm retains the ultimate responsibility and that it establishes reasonable controls over outsourced functions.
Spain is not the first country to show its readiness to take under its wing UK-authorized financial service providers in the context of Brexit. In late September, France’s Autorite des Marches Financiers (AMF) also announced it was simplifying and speeding up the licensing procedures for UK companies.