In my blog about Brexit earlier this month, I outlined some of the key factors for firms to take on board when considering their EU destination for a second licence, to continue to do business across the rest of the EEA under a new passporting arrangement. I took great care not to provide any commentary on the various regulators and regimes available. Clients and prospective clients should have an idea of where they wish to submit an application and, hopefully, taking the considerations outlined in my blog into account. Whatever the destination, fscom is able to provide assistance; expertise that adds value.
Whilst we are able to speak to clients about certain regulators, based on our experience of dealing with them and using my own personal contacts as an ex-regulator, in none of my discussions has anyone expressed an interest in going to France. Whilst many clients have sought to approach the Central Bank of Ireland on grounds of proximity (as well as language, of course), Paris is actually closer to London than Dublin.
Indeed, it was a response to my blog from one of my LinkedIn connections that suggested France was perhaps not as bureaucratic as one might think.
So I sought to find out more about the approach of l’Autorité de contrôle prudential et de résolution (the ACPR). Obviously, it helped that I enjoyed positive relationships with staff at the ACPR during my previous life at the FCA – at least they agreed to meet with me! – but I am grateful to Geoffroy Goffinet, Deputy Director of Authorisations, Licensing & Regulation, and Muriel Rigaud, Head of Department for discussing their approach with me.
With their permission, I am pleased to be able to summarise the key points of our meeting in the form of a Q&A. This is not meant to be an endorsement of the ACPR, but simply an opportunity to raise awareness.
Talk me through the application process; can UK firms submit information submitted to the FCA?
A: We understand the position that UK firms find themselves in, and want to make the process of applying to the ACPR as pragmatic as possible. Where relevant, we will accept documentation provided to the FCA. We are interested in the ‘gap’ between the UK and France requirements. In particular, how will the firm manage its EU business from France, assuming it will be exercising passporting rights.
Given that firms will have to set up a new legal entity, does the ACPR have a ‘minimum requirement’ in terms of staffing levels in the new French office?
A: As prescribed in PSD2, we expect that the head office of the new French entity is in France, and it actually carries out payment services/issues e-money in France. The Board composition needs to reflect the need for someone to be accountable. We expect at least two executive directors to be appointed, with at least one director being resident in France. Similarly, we would expect compliance, risk and AML functions to be located in France.
What is the process, as distinct from other regulators perhaps?
A: We have a dedicated English-speaking desk and are able to accept forms in English. The applicant will be assigned a case officer who will manage the application from beginning to the end. We have seven case officers, currently dealing with c.25 applications, so are adequately resourced to deal with new applications.
What are your expectations in relation to outsourcing?
A: We expect the firm to find the most efficient outsourcing arrangements for the benefit of its business. The firm must be able to clearly demonstrate how it will be able to control the activity in France.
Safeguarding has been a particular problem for UK firms with many banks reluctant to open segregated accounts for this sector. Is there similar difficulty in France?
A: There are a number of credit institutions open to this market, and we are also starting to see the emergence of the ‘guarantee’ as an alternative to the segregated accounts.
How long might it take for an application to be determined?
A: Again, we appreciate the difficult situation that UK firms find themselves in and the associated costs involved in setting up a new company. As such, we will accept an application even before the new company has been incorporated, with ‘draft’ agreements being submitted. The ACPR is able to give an indication of ‘pending authorisation; subject to incorporation and satisfaction of the conditions of authorisation which is valid for 12 months. We would then expect the firm to commence business within 12 months of receiving full authorisation. In the case of a good application, and assuming the firm is already incorporated, we might expect the application to be processed within four months of receipt. As an example over the last two years, the shortest processing time for a good application form was 66 days in 2017/2018 while it took around a year for institutions without any background in regulation.
Will you entertain a pre-application meeting with the firm?
A: Of course. We find that meeting the firm face-to-face provides us with a better understanding of the business model before an application is received. We would expect an outline presentation from the firm, with focus on how it proposes to satisfy, in particular, the local governance and AML requirements (for which new rules will be introduced in October).
Is there an application fee?
A: No, there is no charge for submitting an application. Instead, the ACPR’s costs are recovered through an annual levy.
The FSA did not allow payment institutions to hold funds on a payment account without a completed payment order, resulting in many firms seeking an e-money licence. What is the ACPR view on such businesses?
A: We do not see this as e-money, and would consider that the firm may be duly authorised as a payment institution if, for example, it is waiting for a forward fx deal before making a payment, irrespective of how long that might take.
And fx forwards?
A: These are exempt as long as linked to a payment.
The ACPR’s brand new offices at Rue de Londres - that’s London Road to you, my monolingual friends – is clearly a sign of intent, and the message is they are very much open for business.
Geoffroy Goffinet will be a panellist at Payments International in November so please, if you’re able, do track him down for a chat. In the meantime, please do contact us at fscom for support in compiling your ‘Brexit application’, whatever the jurisdiction.