incoming ” banks, from our point of view. they are making progress in preparing for the post - brexit world, although details and decisions are often still missing. that said, there are still some banks, mostly smaller ones, which seem to be delaying their final decision on relocating. second, there are those banks which access the uk market from the eu – the “ outgoing ” banks, from our perspective. most of these banks have also made plans, which is good. still, some of these plans remain a bit too high - level, in our view. so, more work needs to be done, even if the circumstances might be challenging. my message to all affected banks is this : don ’ t procrastinate. no one will wait for you. when brexit happens you will either be prepared, or not. i advise you to be prepared. and there are a lot of things that need to be considered. settlement finality, for instance, might be affected by brexit, because the protection of the eu settlement finality directive regarding the unwinding of transfer orders will no longer apply across the channel. another issue is the continuity of contracts, that is, the ability of market participants to continue servicing existing contracts, in particular derivatives contracts, without appropriate permissions in place. banks should therefore include this topic in their contingency plans. and finally, banks should assess what brexit means for their recovery plans. after all, it could 3 / 6 bis central bankers'speeches raise barriers and make certain recovery options less feasible. but brexit is not just something the banks have to think about. it also raises a lot of questions for us supervisors. and right from the start, we have worked hard to answer all these questions and map out our approach to brexit. we have to think about cross - border banking groups, for instance. in the wake of brexit, new banks will be set up in the euro area. and they will most certainly be part of banking groups which are headquartered outside the eu, in a third country. this raises the question of how autonomous the new euro area entities will be. will they become well - established banks? or will they end up as shell companies, which are overly reliant on other group entities from outside the eu? and to be very clear : that ’ s not what we want to see. we expect banks to manage some of their risks locally. they need local staff

, and they need local infrastructure. in respect of market risk, banks must be able, in the medium to long term, to trade locally on a permanent basis, and they must have local risk committees. likewise, they will need to trade and hedge risks not just with other group entities but with diversified counterparties. against that backdrop, we are currently working on a booking model assessment framework, which will set out what we expect from banks. naturally, our expectations will follow the principle of proportionality. in other words, large banks that are highly interconnected and conduct complex capital market operations will have to meet higher expectations. but it ’ s not just booking models that play a role here. i already mentioned the need for local staff. it seems, however, that some incoming banks have something in mind which is referred to as “ dual - hatting ”. it means that staff members carry out functions in more than one entity of the group. here, we have some concerns, in particular if dual - hatting includes important functions, extending to that of the ceo. wearing two hats might cause conflicts of interest and limit the time that can be spent on each. this is even more of an issue when the relevant staff members are physically located outside the euro area. in our view, certain key roles should not be part of such dual - hatting arrangements. in other words, euro area entities must be sufficiently independent from group entities that are located outside the eu. we will not accept shell companies ; that ’ s for sure. we do not see them as banks. and we won ’ t accept more inventive set - ups either. in order to avoid having to move staff and assets to the continent, some banks seem to be considering the idea of establishing a subsidiary in the euro area, which would then set up a branch in the united kingdom. this branch would use the subsidiary ’ s eu passport to enter the european market from the uk. we have serious misgivings about this. first, the primary reason for establishing a branch should be to serve the market of the country where the branch is based. then, there are legal issues. can a third - country branch use its parent company ’ s eu passport to access the european market from that third country? that cannot be in the spirit of european law. and the subsidiary might just serve as a shell company. as i said, we do view these kinds of design critically. internal models – setting capital buffers ladies and gentlemen,