After the Brexit vote, the EU Commission began discussions about the future of the European Banking Authority (EBA), which is based in London. The agency was a response to the financial crisis and has among other duties to perform stress tests in financial institutions operating in the region.
The British capital was chosen to receive such agency, taking into account the dynamism of its financial sector. Although, there was also criticism, especially for the fact that the UK is not part of the eurozone. As Prime Minister Theresa May prepares to trigger article 50, Brussels is looking to relocate the EBA.
While Stockholm, Warsaw, and Rome were attracted by this opportunity, Paris and Frankfurt were the top contenders. It seems that the latter has more clout. Apparently, even French authorities are supporting the German city’s bid. It should be noted that the European Insurance and Occupational Pensions Authority (EIOPA) and the European Central Bank (ECB) are already based in Frankfurt. If successful, the move will transform the city into the financial capital of the EU.
What is at stake? Well, it’s important to check facts and figures. International agencies require highly skilled professionals and a headquarters. This is the direct impact. Afterward, there are several secondary economic benefits, especially for the housing sector. With regards to the EBA, it is estimated that annually, the agency has a budget of €33 million. Also, it has a staff of 160 employees.
The relocation, however, won’t be cheap. The EBA moved to new offices in London in 2014 and signed a lease agreement until December 2026. While the contract can be cancelled, the penalty payment of 16 months’ rent totals €3,246216.
Nothing has been decided yet. But it is important to follow-up the next steps of the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA).
According to sources quoted by Politico the debate also provides an opportunity to rethink the structure of the agency. European authorities might even consider merging EBA with EIOPA. The topic, however, is far from being thoroughly discussed.
As the United Kingdom prepares to the leave the bloc, many European countries might profit from the spoils of such maneuver. London could also lose its position as a center for clearing financial transactions. These procedures ensure that transfers proceed smoothly.