Are London fintechs applying for ECB licenses?

ECB provides guidance on the licensing of banks and fintech

The European Central Bank (ECB) has issued guidance on the licensing of banks and so-called fintechs. They describe the process of applying for a banking license and its prerequisites, especially with regard to Fintechs. According to the ECB, the guidelines are intended to increase the transparency of the process and to improve the comparability of licensing processes across national borders.

The head of the ECB's banking supervision, Daniele Nouy, recently pointed out the need for guidance on how to deal with Fintechs and stated that digitization would lead to a breakdown of the value chain in banking. Companies no longer covered the entire spectrum of the traditional banking business, so the technical and financial hurdles for market entry were lower than before.

According to the ECB, bank licenses are to be requested from the national competent authorities. However, these applications are then processed at the ECB. Among other things, credit institutions must meet the capital requirements, have the necessary supervisory and risk management structures and have a management suitable for the banking business.

Especially with Fintechs who apply for a banking license, the ECB emphasizes, however, that technical expertise is often more important than the bank-specific suitability. According to Giuseppe Siani, Deputy Director-General of the Microprudential Supervision IV Division, the ECB has received 86 applications for banking licenses in November and approved 37 of them since the start of the SSM joint banking supervision.

That does not mean that the rest has been rejected, Siani said at the presentation of the paper. Rather, some applications would be lost during the process or the companies would withdraw them. In 2017, the ECB received "over 20 applications". How many of these were "Brexit" applications, he did not want to say. The ECB is currently examining applications of two fintechs. Since June 2016, it has received six applications from such companies.

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