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Roundtable in Frankfurt

Prof. Dr. Joachim Wuermeling, Member of the Executive Board of Deutsche Bundesbank: “The financial industry is prepared for a no-deal Brexit—supervision of clearinghouses causes unease.”

zeb continued its zeb Financial Market Roundtable series with another roundtable event in Frankfurt. At these events, renowned representatives from politics and financial institutions talk and discuss with a small, selected group of participants from executive boards of banks and insurance companies. Professor Joachim Wuermeling, who joined the Executive Board of Deutsche Bundesbank in autumn 2016, shared the concern that protectionism was increasing worldwide and could ultimately become a real burden on the economic situation. The trade disputes between the USA and China and the EU could strongly influence global trade. Nevertheless, Prof. Wuermeling was optimistic that bilateral negotiations would eventually stop the spiral of tariffs and counter-tariffs. There was no alternative to the achievements of the rule-based multilateral trading system. It was therefore necessary to preserve and further develop the world trade order.

According to Prof. Wuermeling, Brexit was another factor of uncertainty. Fortunately, German banking supervision had urged credit institutions early on to prepare for a disorderly (no-deal) Brexit. And this strategy paid off, the institutions made considerable progress and for the most part, preparations were successfully completed. Most British banks which needed licenses for their euro area units had already received them. Thus it was possible to continue business relationships with EU customers. Having been prepared “to a reasonable extent” had been a joint effort of supervisors and the financial sector. However, the Bundesbank’s Executive Board Member was concerned about the supervision of the large clearinghouses after Brexit. So far, international cooperation among supervisors had worked to some extent, but with a look to the future, this cooperation caused some unease. “In crucial situations, regulatory access to this infrastructure will be lacking,” Wuermeling said. There was a certain anxiety about how a clearinghouse would behave if it was confronted with different requirements of supervisors in the USA, Great Britain and the EU in the event of a crisis. “The more the supervisors deal with this issue, the more worry lines will become visible on their faces.”