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Eurozone banks must prepare themselves for the worst case scenario of a hard Brexit and they must accelerate their preparatory work, European Central Bank Executive Board member Sabine Lautenschlager said Wednesday.
"I have a very clear message to both smaller and larger banks: the clock is ticking," Lautenschlager, who is also the vice-chair of the ECB Supervisory Board, said in an interview in the bank's Supervision Newsletter.
"No one knows how Brexit will play out, and that's why all affected banks should prepare themselves with a hard Brexit in mind."
The banks are not as far advanced as supervisors would like them to be, she said.
Many large banks who want to relocate operation to the euro area have made progress in planning, but have not made any final decisions yet on how to organize their businesses, she noted.
Lautenschlager urged the banks to hurry, saying, "We only have a narrow time frame in which to assess plans and applications, following a standard process we have already communicated."
She also warned against competition among different euro area countries in attracting banks leaving the UK. "We will oppose any race to the bottom in supervisory standards," the top ECB official said.
While she was uncertain as to how the post Brexit landscape will look like, Lautenschlager asserted that London will no longer be an automatic entry point to the European Union, though it will stay an important global financial hub.
