Britain-based banks moving to Europe may get easier entry, ECB says

FRANKFURT (Reuters) - Banks looking to move from Britain to the euro zone after Brexit may be given an expedited entry, with supervisors willing to spare them from a lengthy initial test of their risk models, a top European Central Bank official said on Wednesday. The ECB may be willing temporarily to forego its requirement to pre-approve the financial models banks use to determine risks, provided that these models have already been approved in Britain, ECB board member Sabine Lautenschlaeger told bank executives, confirming a Reuters exclusive. A review of such internal models can take months, so the ECB's temporary waiver could expedite relocation, potentially reshaping Europe's financial landscape with places like Frankfurt, Paris, Luxembourg and Dublin all looking to grab business from London. "With a view to internal models, we would aim to be accommodating regarding the timing," Lautenschlaeger, a bank supervisor, said. "There will be a transitional period in which new euro area entities might use internal models that have not yet been approved by the ECB." The condition for such an exemption is that models must have already been approved by the UK's Prudential Regulation Authority and that the banks must have already applied for internal model approval in the euro area, Lautenschlaeger said. "The transitional period will cease as soon as we have approved or rejected the bank’s model application," she added. Britain will trigger divorce proceedings with the European Union on March 29 and U.K-based banks are almost certainly lose their rights to access the EU's single market from London, now the bloc's financial hub. A handful of firms, like Goldman Sachs and insurer AIG have already announced plans to move some operations to Europe but most are still holding out, contemplating their next step as it may take years before clarity on the new regulatory framework. Despite the expedited entry, banks should not expect easier supervision, Lautenschlaeger said, warning that Europe will not lure banks by giving up its standards. "We will not accept empty shell companies," she said. "All entities in the euro area must have adequate local risk management, sufficient local staff and operational independence." (Reporting by Balazs Koranyi and Andreas Framke, editing by Jeremy Gaunt)