Brexit update for financial services firms - week ending 22 June 2018

The week in outline: The week was dominated, again, by the EU (Withdrawal) Bill. The bill has completed the parliamentary process and now only awaits the formality of Royal Assent. The Act will repeal the European Communities Act 1972 and provide the mechanism for the domestication (or ‘on-shoring’ or ‘porting’) of EU law into the domestic legal system.

Philip Hammond and Mark Carney presented a united front at Mansion House, after recent press speculation about a rift in policy between HMT and the BoE. There was still no detail about the UK proposals for financial services; the Chancellor briefly repeated the case for a bilateral mutual recognition based regime (see ‘Where We Stand’ below). As explained in our update for the week ending 18 May, this would presumably take effect under the GATS exemption for multi-sectoral free trade agreements. TheMost Favoured Nation principle (MFN)normally requires benefits agreed bilaterally to beofferedto other countries who meet the same criteria ('open access'),but the exemption allows more favourable/preferential treatment to be agreed between FTA parties without open access applying.

The Chancellor criticised the EU’s moves to toughen its third country equivalence provisions as market protectionism (forcing business into the Eurozone) and cast doubt on the idea of ‘enhanced equivalence’. This term was used by the Chancellor to refer to the steps being taken unilaterally by the EU to develop its regulation of third country business ahead of Brexit, on the basis that the UK will not have preferential access – see our previous updates and the report below about the European Commission’s proposed changes to third country regulation under MiFID II and further proposals by ESMA in relation to third country trading venues. The term is also sometimes used to describe a possible fall-back position/option B if the UK cannot reach an agreement over its bilateral mutual recognition based plan. This would involve the EU extending the equivalence based access rights for third country firms under EU legislation – on an ‘open access’ basis (i.e. where other states can apply under MFN principles) – to accommodate dual regulation coordination (DRC) agreed between the UK and the EU. For example, this might introduce a third country firm regime for wholesale banking, similar to the one for investment business under MiFID II. There could then be bilateral EU/UK arrangements to agree a reciprocal basis for this DRC, including regulatory/supervisory cooperation.

Meanwhile there is increasing discussion about a quasi-single market solution (temporary or permanent) for goods sectors, partly as a solution to the Irish border issue. Such an outcome would presumably make it more difficult for the UK to secure substantial DRC in financial services (and other service sectors). Previously some had expected the UK to prioritise FS where it has a substantial surplus, rather than goods where it is the EU-27 that have a substantial surplus and where flexibility was seen as critical to independent free trade agreements.

Finally, the Chancellor announced a ‘Global Financial Partnership Strategy’ to improve market access and regulatory cooperation/DRC with countries outside the EEA. He did not, however, provide any detailed information about this new strategy.

Mansion House Speeches by Philip Hammond (HMT) and Mark Carney (BoE)

Text of Philip Hammond's and Mark Carney's Mansion House speech given on 21 June 2018 follows. Philip Hammond discusses aspects of Brexit and financial services. He also considers UK fintech initiatives and notes the creation of a Global Financial Partnerships Strategy, a Financial Services Skills Taskforce and a Green Finance Institute. Mark Carney’s topics include: BoE's work to support the development of the UK financial system, including with regard to fintech and Brexit. Philip Hammond’s speech can be accessed here and his notes can be accessed here. Mark Carney’s speech can be accessed here.

Philip Hammond

“In my speech at Canary Wharf in March I outlined a vision of a future financial services partnership. Where we remain highly aligned and deeply interconnected. Even though we will be outside the EU. And explained why this is in the overwhelming interest of UK and EU businesses and citizens. Of course, we are not yet at the stage of formal negotiations on financial services.”

“But since I gave that speech, I have discussed our approach with many counterparts in the EU and beyond. There is a mixture of views. The view of the Commission and some Member States is that the only possible route for future financial services access is through the EU’s existing, off the shelf, equivalence arrangements.”

“I don’t agree with that. In my speech in March I set out why the existing equivalence regime would not work for UK-EU financial services trade. It is piecemeal, unilateral and unpredictable. And therefore does not provide the stability that a well-regulated market requires. And I think these weaknesses are increasingly recognised. I know there is now an active debate in Europe about some form of ‘enhanced equivalence’ to structure the relationship with the UK for financial services.”

“But enhancement, like beauty, is very much in the eye of the beholder.”

“And I will be frank. I do not consider some of the measures currently under consideration in the EU on third country regimes for CCPs. Or some of the proposals put forward in the European Parliament on restricting investment firms, to represent “enhancements”. Because these proposals have nothing to do with equivalence. And everything to do with an ambition to force the location of business into the Eurozone.”

“So although I have heard talk of ‘enhanced equivalence’, I have not yet seen a credible proposal for what it might mean or a clear articulation of how it might work. So, as of today, the most developed model for a stable and efficient future financial services relationship between the UK and EU, is the one I set out in March.”

“And this evening I can announce a Global Financial Partnerships Strategy. Bringing together governments, regulators, and industry. To build an enhanced framework for cross-border financial services. Facilitating access to global markets. And positioning the UK as the gateway of choice.”

“Our vision is for a new set of partnerships. Combining new tools, like financial services trade agreements, and existing ones, like our financial dialogues. Positioning the UK as the most global financial services market in the world. Because “Global Britain” is not just a strategy for Britain’s economic future. It’s a statement about what kind of people we are - and about the economy and the society we are seeking to build.”

Mark Carney

“A resilient system is anti-fragile – robust even to risks we do not anticipate. To this end, we have comprehensively reformed the financial system since the crisis. Both capital requirements and contingent liquidity have increased ten-fold. The major UK banks now have the balance sheets to withstand a disorderly cliff-edge Brexit, however unlikely that may be.”

Mark Carney sets out three pillars for the UK's future financial system "The first is strong global standards. The UK has been at the forefront of G20 reforms to create a global financial system that is safer, simpler and fairer. Implementation is now being regularly assessed and transparently reported by the FSB and the IMF. This second pillar is deep supervisory cooperation. To manage cross-border challenges to financial stability, international authorities must share relevant information and work together. As the home to four, and host to the other 26, globally systemically important banks, the Bank of England participates actively in all major supervisory colleges, sharing information and expertise gained from overseeing the multitude of complex risks unique to London. We expect the same from those whose firms operate and take on large risks here. The PRA’s open, cooperative approach to supervision means wholesale activity in London can remain globally-integrated and highly efficient, without compromising resilience.[1]

“The third pillar of responsible openness is ending “too big to fail”. With enhanced resolution powers and planning, the Bank of England now has the ability to resolve failing banks. The UK’s major banks are on track to complete this year the ring-fencing of their critical domestic high-street businesses from their riskier wholesale activities. And they already hold loss absorbing resources of 25% of their risk-weighted assets against a 2022 requirement of 29%. As a consequence of this progress, market discipline is returning, with the public subsidy enjoyed by the largest banks having fallen by 90%. Now is the time to reap the benefits of these enormous efforts. Platforms are being created for deference to each other’s approaches when they achieve similar outcomes. With the three pillars in place, an open, resilient global financial system is possible.”

“The pillars underpin the government’s new Global Financial Partnerships Strategy. The Bank of England will be particularly engaged in deepening our supervisory cooperation with major emerging economies and will continue to develop the infrastructure to support cross-border capital flows in their currencies. With respect to the European Union, the Bank remains of the view that an ambitious future financial services relationship, founded on commitments to achieving equivalent outcomes and supervisory cooperation, remains both feasible and in the interests of the UK, Europe and the world.”

“The future economic and security partnership with the EU is for the government to negotiate and Parliament to approve. The Bank’s role is to manage risks associated with the Brexit process and to provide technical support to the government as needed. In this context, HM Treasury and the Bank are aligned on the importance of maintaining the high regulatory standards required by the world’s most important and complex international financial centre. And we are both committed to responsible openness because it allows capital to move freely, efficiently and sustainably between jurisdictions and that supports trade, investment and jobs in the UK, Europe and the rest of the world. More broadly, building on the progress already made, financial services could serve as a template for broader services trade liberalisation. Taking this high road could help solve the problem of persistent trade imbalances. Bank of England research suggests that reducing restrictions on services trade, to the same extent as those on goods have been lowered over the past couple of decades, could reduce excess global imbalances by close to one half.”

Commentary: We comment on the Mansion House speeches in the week in outline above.

The UK government is still saying very little publicly about the detail of its proposals for the future UK/EU arrangements in FS (see ‘Where We Stand’ below and our update for the week ending 25 May). The concerns about the position of HMG are:

• whether substantial DRC (which HMG implies it is seeking) is achievable (particularly in the light of the EU’s outright rejection of the UK proposals); and
• whether negotiations will lead the UK to accept a less ambitious approach with less DRC and/or greater ‘rule-taking’. Would the principle of a ‘bilateral’ approach be replaced with a more one-way approach based on EU rules? Would the outcome based approach be tightened to require closer equivalence? Would the UK water down the right to diverge with some form of commitment to EU rules (present or future)?

The Chancellor included a brief announcement (with a cross reference in Mark Carney’s speech) of a ‘Global Financial Partnerships Strategy’ - as part of the broader ‘Global Britain’ strategy. Public statements on these policies – certainly in relation to financial services – are very limited or rather vague. This gov.uk web page and this parliamentary enquiry provide some limited background information. Philip Hammond talked of ‘combining new tools, like financial services trade agreements, and existing ones, like our financial dialogues’; Mark Carney said the BoE will be ‘engaged in deepening our supervisory cooperation with major emerging economies and will continue to develop the infrastructure to support cross-border capital flows in their currencies’. He also thought that the progress already made in financial services could serve as a template for broader services trade liberalisation. In our report of April 2017 we explored how the UK might develop its relationship with non-EU countries both in terms of market access under WTO principles and under DRC/mutual recognition/deference arrangements.

ESMA: Speech by Steven Maijoor: MiFID II implementation – achievement and current priorities

Text of Steven Maijoor's speech, given on 21 June 2018, follows. Specific areas covered include: the double volume cap mechanism; the systematic internaliser regime; bond liquidity; market data issues; tick size regime and the need for a third country regime for trading venues in MiFID II. The full text can be accessed here.

“This leads me to a broader issue that, in our view, would require further attention in particular in the context of Brexit: the need for a comprehensive regime for third country trading venues. This would certainly make sense where, for instance, based on our own rough estimates, about 40% of trading in shares issued in the EU 27 currently takes place on UK trading venues.”

Third Countries and Trading Venues: the Need for a Comprehensive Regime

“MiFID II creates specific equivalence regimes for third country venues only for the purposes of the trading obligations for shares and derivatives. It does address remote access to regulated markets situated within the EU by EU firms. However, the conditions under which third-country venues may access EU liquidity through the placing of trading screens in the EU are notharmonised. In other words they are left to national discretion. When preparing the ESMA Brexit Opinion on Secondary Markets, we did some research and noted how diverse and more or less detailed national rules in place are.”

“To ensure a consistent approach, and that risks for the EU related to third country venues are addressed, it is essential to introduce a harmonised EU regulatory and supervisory framework governing third-country venues. The Commission has been proposing to amend the MiFIR equivalence conditions for third country investment firms ahead of Brexit [see the commentary below for further details of this proposal] and we would welcome an initiative by the Commission with respect to third country trading venues.”

“A harmonised third country regime would have the benefit of ensuring a level playing field between EU and non-EU trading venues and mitigate potential risks related to orderly markets, investor protection and ultimately stability. Where a third country venue provides direct access to EU remote members, this facilitates access by EU investors to the instruments traded on that venue and there should be sufficient confidence that EU investors can safely do so. This approach would be similar to the one already in place in some third countries, including for example the US-CFTC regime in respect of third-country venues.”

“From my perspective, a third country regime for trading venues would cover both regulated markets and trading venues operated by investment firms or their equivalent, as there seems to be little justification to treat them differently. Any regime should ensure that a trading venue in the third country complies with requirements which are equivalent to those for EU trading venues, and that the EU has the supervisory tools to address risks relevant to the EU. There also needs to be adequate information exchange. Those are some preliminary thoughts and we would be ready to provide further technical advice to the EU institutions on this issue, if required.”

Commentary: The changes to MiFID II proposed by the European Commission to which Mr Maijoor refers above were considered by the HoC European Scrutiny Committee in its 16th Report of Session 2017-19 - “The Economic Secretary to the Treasury (John Glen) submitted an Explanatory Memorandum on the proposals in January 2018. Overall, the Minister has welcomed the approach taken by the Commission, which it says would “provide a good basis for a new prudential regime for investment firms” which could “have significant benefits for UK industry” given the concentration of such firms in the UK. With respect to the proposed changes to the MiFIR equivalence regime, he states only that the Government will seek to “agree stable, reciprocal arrangements” for trade in financial services which would bypass the need for the UK industry relying on equivalence provisions.”

The Committee agrees “that it makes sense to rationalise the prudential regime for investment firms in view of their specific business models and the risks they pose to their customers and the wider market. The proposals are clearly of great relevance to the UK given it is home to the majority of Europe’s investment activity, in terms of both businesses and assets."

However, “the investment firm proposals also raise a number of further questions in the context of the UK’s withdrawal from the EU.”

“Under the new prudential framework, the approach to “class 1” investment firms is clearly predicated on the assumption that the EU’s systemically important firms—which are all based in the UK—will relocate some of their activities to the Eurozone following the UK’s withdrawal and must therefore be brought within the scope of the Single Supervisory Mechanism; and the Commission has also proposed to raise the threshold before the UK (or any other country) could be granted equivalence to provide cross-border investment services under MiFIR, with the implicit aim of incentivising the UK to maintain continued convergence with the EU’s prudential regime post Brexit if it wants to secure preferential market access.”

“The EU is clearly operating under the assumption that the UK will become a “third country”, subject to the same market access restrictions (and opportunities to seek equivalence) as all other countries outside the Single Market”

“In these circumstances, the only prudent option for the Committee is to assume that the Commission proposals on a prudential regime for investment firms could have a constraining effect on the UK’s regulatory autonomy after Brexit: either under the terms of any agreement on financial services which provides preferential market access in return for continued regulatory convergence, or because it modifies the conditions under which UK firms could obtain market access based on the existing MiFIR equivalence regime.”

The CityUK: Continuity of cross-border financial contracts post-Brexit

CityUK's paper on this topic argues that the full range of affected cross-border contracts must be grandfathered, either for a time-limited period, or potentially until maturity. Access it here

As has been mentioned on numerous occasions “when the UK leaves the Single market, UK-based providers will no longer be able to rely on ‘passports’ and the right of establishment to service existing cross-border financial contracts through the European Economic Area (EEA). There will also be an identical impact on EEA providers who will be unable to service existing financial contracts with UK-based parties.”

Public sector

For the public sector, CityUK argues “to remedy these difficulties for UK and EEA providers, a coordinated solution which takes into consideration key timeframes, agreed between the UK and the EU, is required. It is the only viable option across the full range of affected contracts, especially as other potential solutions would not protect customers and clients fully. The solution must grandfather affected cross-border contracts either for a time-limited period or potentially until maturity.”

In CityUK’s view this could be achieved through a bilateral agreement, separate regulatory action or legislation in each jurisdiction or by inclusion in the EU-UK Withdrawal Agreement alongside appropriate regulatory backing for such a political agreement.

CityUK argues that “there are certain situations where such official grandfathering is the only available solution, even in the long term, such as: contracts relating to assets and liabilities that cannot be separated into UK and EU27 components, e.g. pan-European directors’ and officers’ liability. Claims that arise many years after a policy has expired but related to a period that was covered, e.g. insurance claims for asbestos exposure. Instance where a small number of contracts are affected, and it is simply not commercially viable to establish a new subsidiary in a different country to service a small number of contracts.”

Private Sector

In regards to the private sector, the paper argues, “firms are already taking steps to mitigate the impact on customers and clients, however market participants cannot fully address this issue without regulatory support by March 2019. This is not through lack of diligence on the provider’s part, but because the scale of the task and the need for third party cooperation will make it extremely challenging and operationally complex to complete in the limited time remaining before the UK leaves the EU.”

CityUK lists a number of reasons why that is the case, such as contracts that cannot be transferred, sequencing issues and capital requirements, client interaction, regulatory and operational risk and market disruption.

“For those that already have an entity to transfer these contracts to, this still takes time and is potentially problematic as it would need approval from courts/supervisory authorities and/or customers”. Furthermore, “any revisiting of a contract opens up the possibility that counterparties will seek to renegotiate other elements of it, further delaying the process.” In regards to small and medium commercial clients, “the implications of such contract restructuring may involve significant demands upon management time and resource, including additional one-off reorganisation costs and even ongoing expenses where it is not possible to restructure the affected contracts on a like-for-like basis." And finally "an array of differing private sector solutions will also carry regulatory consequences for NCAs.”

The CityUK therefore concludes “the smooth operation of financial markets and the continued ability to service customers and clients is the foremost priority for providers across Europe. It is in the mutual interest of the UK and the EU, and most importantly, customers on both sides of the Channel, that urgent agreement is struck on the ability of these contracts to be grandfathered, either for a defined period or potentially until maturity. Technical issues, such as contract continuity, can most effectively be addressed separately from the political negotiations.”

House of Commons European Scrutiny Committee 31th Report of Session 2017-2019

Section 5 of the report considers a proposed EU Directive governing non-performing loans, debt management and out-of-court collateral recovery, and details the latest ministerial response to the Committee’s specific concerns. This matter is still under scrutiny by the Committee. The full report can be accessed here.

Further to our previous report the HoC European Scrutiny Committee has published a further report taking account of the subsequent response by the Minister and have given the following assessment:

“If the transposition deadline does apply while the transition is still in effect, the UK will have to transpose the Directive’s provisions into domestic law (including, if necessary, the creation of a new out-of-court collateral recovery procedure) and accept the provision of administration of loans between UK banks and UK-based customers by credit servicers based elsewhere in the EU, without direct oversight of their activities by the Financial Conduct Authority.

The situation after the transition is less clear-cut. In principle, after the UK leaves the Single Market, credit servicing companies based in the EU would no longer have a right to ‘passport’ their activities into the UK domestic market (and vice versa for British firms). At that point, UK-based credit servicers would only be able to operate within the Single Market if they establish a separate legal entity in an EU country, subject to authorisation and supervision by that country’s domestic regulator. When EU law ceases to have effect, the UK would also be free to modify or disregard any of the other provisions of the Directive.

However, the Government is seeking a new financial services agreement with the EU based on dynamic ‘mutual recognition’, wherein principle both sides would commit to the same regulatory outcomes without operating in a common legal framework. This would still allow UK firms to provide financial services into the EU on a cross-border basis and vice versa, without facing the usual market access restrictions for ‘third countries’. While facing substantial political and legal hurdles, calling into question whether such an agreement could be negotiated with the EU at all (let alone by the end of the transitional period), it is unclear what it would in practice entail for the UK’s debt recovery regulations and to what extent these would stay aligned with the new Directive as a quid pro quo for continued access to the EU market for British banks.

Given the uncertainty around the exact legal impact of the Directive in the UK, we remain particularly concerned about its implications as regards both the out-of-court collateral recovery and the new passporting regime for debt administration firms. With respect to the latter, we remain to be convinced that it is in the interest of UK borrowers to have their loan agreement with a UK bank administered by a credit servicing firm which is not subject to FCA oversight or embedded in the UK’s regulatory culture for debt administration. We would welcome further information from the Minister in due course about the specific borrower protection this may raise, including—for example—in relation to redress, debt collection practices or errors in tracing the correct debtor.”

Where We Stand: The draft Withdrawal Agreement makes no provision for financial services but it does provides for a transition period from 29/03/19 to 31/12/20 during which the EU single market legislation (including in FS), and its dual regulation coordination (DRC)/mutual recognition, would continue to apply to the UK. The UK would, however, cease to vote and participate in EU institutions, whilst these institutions continued to have jurisdiction in the UK. The agreed framework for the future relationship (post-transition) is due to be recorded in a political declaration annexed to the Withdrawal Agreement. The timetable for the negotiations has slipped again and they are now expected to continue until late in the year, with ratification thereafter. The risk that the UK leaves the EU without a transition period (because of a break-down inthe negotiations) will therefore continue until late in the day. The UK has announced unilateral plans to assist EU firms in that scenario (with a temporary permission regime) but the EU has not reciprocated or addressed UK concerns about contract continuity in that scenario. It seems increasingly unlikely that any detailed agreement of specific DRC/mutual recognition in FS would be agreed in the political declaration this year (which may only describe - in accordance with the text of Article 50 - the intended framework for the future EU/UK relationship); presumably the negotiation of specific DRC arrangements would take place after Brexit.

The UK has proposed (see Philip Hammond's speech of 7 March) that after the transition period, the EU/UK relationship in financial services should be a bespoke bilateral arrangement for DRC and mutual recognition of each side’s rules, based on international standards and equivalent outcomes (without requiring identical rules on each side). The rationale is that the EU and UK will start with fully aligned regulatory regimes (because the UK is transposing all EU regulation into the UK domestic regime) and DRC should therefore continue, until there is divergence in the regulatory regimes. This would provide much greater access for UK firms than the EU’s current regime for third country mutual recognition/DRC. The EU position is that market access will be granted under mode 3/via local establishment (and not for services business) and this will be subject to host state regulation. This will offer the UK no more than is available to other third countries - regulatory cooperation on a voluntary basis and DRC limited to (unilateral and revocable) decisions by the EU under its third country “equivalence” legislation. The EU is reviewing and toughening its third country policy in order to deal with the UK as a third country. Under this scenario, UK firms will face differing national perimeter rules (in many areas)for services businessunder modes 1 and 2 and access under mode 3 would require local authorisation and, potentially, a local subsidiary. Our report on Brexit and FS in April 2017provides detailed analysis of the potential for mutual recognition/DRCunder an EU/UK agreement. Until it is known what DRC arrangements are to be agreed, the important issue of transitional measures and the mechanics/practicalities of turning off current DRC, as the UK leaves the single market at the end of 2020, cannot be addressed (e.g. via phased implementation and grandfathering).

Other publications from the RegZone Brexit news feed

HoC Library Briefing paper Brexit: Customs and Regulatory Arrangements

This HoC library briefing considers the proposals the UK has made to satisfy the simultaneous objectives to leave the EU Customs Union, but have a cooperative "customs arrangement" following Brexit; and to leave the Single Market, but maintain trade that is "as frictionless as possible"’ following Brexit. The full paper can be accessed here.

House of Commons: Brexit negotiations update

This HoC library briefing paper provides an update on the progress of the Article 50 TEU negotiations since March 2018, and what this leaves to be agreed before a Withdrawal Agreement and attached Political Declaration on the Future Relationship can be concluded. Access it here

HoC Library Briefing Paper CETA: the EU-Canada free trade agreement

This HoC library briefing document notes the impact of Brexit for the UK on the agreement. The full paper can be accessed here.

EC: Police and Judicial Cooperation in Criminal Matters

This EC document consists of slides presented to the EC Article 50 Working Party on 15 June 2018. The full presentation can be accessed here.

European Commission: Speech by Michel Barnier at the European Union Agency for Fundamental Rights

Speech by Michel Barnier outlining the EU proposal for Police and Judicial Cooperation in Criminal Matters. The full speech can be accessed here.

ESMA Annual Report 2017

ESMA has published its annual report, which includes details of its work over the period and through 2018 (including with regard to MiFID, EMIR and Brexit-related issues. The full report can be accessed here.

ECB: Statement by Daniele Nouy at the European Parliament

The statement made by Danièle Nouy at the first ordinary hearing of the European Parliament’s Economic and Monetary Affairs Committee on 19 June 2018 follows. Topics include: ECB's targeted review of internal models, the ongoing EBA stress test, cyber and IT risks, Brexit, non-performing loans and key legislative files for the Banking Union. The full statement can be accessed here.

Programme: EU-UK Article 50 negotiations Brussels, week of 18 June 2018

Programme for the EU-UK Article 50 negotiations that have are being held in the week starting 18 June 2018. The full programme can be accessed here.

Joint Statement on Withdrawal Agreement 19 June 2018

Joint Statement by the UK and the EU outlining the progress made by the negotiators of the European Union and the United Kingdom on the draft Withdrawal Agreement. The full statement can be accessed here.

European Union (Withdrawal) Bill

Further to last week’s update, both Houses agreed on the text of the Bill which now waits for the final stage of Royal Assent when the Bill will become an Act of Parliament. Royal Assent is yet to be scheduled. The Hansard report of the House of Commons can be accessed here, the Lords report here.

CMS RegZone publishes weekly updates on Brexit developments for financial services firms. These provide analysis and commentary on significant developments during the week in question. A daily digest of Brexit news (without analysis or commentary) is also available by email here and online via the RZ news wizard here (both of these can be filtered using the Brexit topic).

You can access a RegZone Bibliography here with all the important documents published prior to the start of the RegZone newsletter

[1] See the Bank of England’s Policy Statement 3/18 “International banks: the Prudential Regulation Authority’s approach to branch authorisation and supervision”