Brussels to host EU banking regulator post Brexit? No thanks

Bids to host the European Banking Authority must be submitted by end of July.

The race is on to host Europe’s banking watchdog after Brexit — but an early idea to anoint Brussels as the compromise candidate ahead of heavyweights like Paris and Frankfurt has fallen flat.

The European Banking Authority, and its 160-member staff, will leave its home in London’s Canary Wharf after the U.K. departs from the EU. The final decision on a new host city will be made by the Council of the EU in November, but cities have until the end of July to submit bids for what will be one of the most tangible and immediate prizes on the Continent from Brexit.

Dublin, Frankfurt, Luxembourg, Paris, and Prague are among the cities that have already thrown their hats into the ring to host the banking watchdog. But concerns about political infighting across the bloc for the prestigious agency led to a suggestion from Paris that Brussels act as a compromise location to avoid deep divisions.

That idea, however, has not gone down well with other countries.

“I think Brussels has a hell of a lot [of EU institutions] at the moment with the Council and Parliament,” said Irish MEP Brian Hayes of the Fine Gael Party. “It would send out a very bad signal if Brussels becomes the only option.”

“I think the independent assessment [by the European Commission] should do its work and get on with it,” Hayes said, adding that he supports Dublin’s bid.

Carole Ensch, a spokesperson for Luxembourg’s permanent representation to the EU, also objected: “We don’t agree with this theory … If [a Brussels compromise] was played in advance, we wouldn’t have bothered to put in a formal bid.”

The Brussels compromise idea was originally floated by a French official in April who pointed out the placement would allow the EBA to be close to the Commission, ensuring a close cooperation on future regulatory work. France’s permanent representation to the EU in Brussels declined to comment for this article.

Unsurprisingly, a diplomat close to the Belgian government welcomed the concept. However, they would not confirm or deny when Brussels intends to put forward an official bid next week.

The diplomat also pointed out that Brussels serves as a compromise option already — pointing to the headquarters of NATO and several EU institutions.

“Brussels is always a compromise location,” said Nicolas Véron, a senior fellow at think tank Bruegel. As an example, Véron cited the Single Resolution Board, which the EU set up to deal with failing banks in 2015. “[Policymakers] didn’t want too much to be in Frankfurt,” Véron said. “So, the answer was Brussels by default.”

But the complexity of the bidding process — which involves up to three rounds of voting by member countries — means it will likely be too difficult to engineer a political compromise. And it is further complicated by the fact that an agreement will also be required on a new location for the European Medicines Agency (EMA) — it too is based in London’s Canary Wharf.

“If this deal was only about the EBA, Brussels would have an edge because it’s a neutral location,” said Véron, “but as the same decision is needed on the EMA, the likelihood is slightly lower.”

While it’s still unknown how many countries will make their official bid for the EBA, the banking watchdog’s executive director, Adam Farkas, said that “over a dozen cities [have] expressed interest” in the agency.

One of the heavyweight cities bidding for the EBA is Frankfurt, already home to the European Central Bank, the EU’s insurance watchdog, and the ECB’s Single Supervisory Mechanism.

In recent weeks, the city also became the principal target for roughly 20 banks fleeing the U.K. in the face of Brexit — although European banks are reluctant to express a preference for where the agency itself should be located.

The Hessen city has hardly been humble about its heavyweight status and even flaunted the idea of merging the EBA with the European Insurance and Occupational Pensions Authority (EIOPA).

POLITICO contacted the German finance ministry, and a spokesperson reiterated recent comments by Finance Minister Wolfgang Schäuble, who noted that “from our point of view, it would make sense to put the EBA together with the European supervisory authority for insurance, EIOPA, based in Frankfurt.”

But it’s not just Germany that believes it has what it takes to win the coveted agency.

And the bidding war is yet to truly begin.

When they submit their entries, member countries will have to prove their all-around attractiveness including, for example, sufficient housing and schooling for relocating staff members.

Brussels may be a neutral location with the necessary infrastructure for the EBA but for now, no capital seems ready to drop partisan campaigns to take home the prize.

Cat Contiguglia and Patrick Temple-West contributed reporting.

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