Tougher demands by EU regulators may force banks such as Standard Chartered to shift more jobs to Europe than originally planned due to Brexit, one of the lender's top bosses has warned.
Standard Chartered has been waiting nearly nine months for EU officials to approve a banking licence that will turn its Frankfurt branch into a subsidiary, and while it originally expected approval by spring, it has been at the mercy of regulators still finding their footing.
Tracy Clarke, the bank's regional CEO for Europe and the Americas, told the Press Association: "Because we were one of the first (to apply for a licence) there was no precedent for us, or for them.
"It's been a learning process on both sides."
While dialogue with German regulators and the European Central Bank (ECB) has been "very constructive", Mrs Clarke said they have become increasingly strict.
"They're getting firmer about what they expect to see, and their stance is therefore becoming a bit tougher actually," Mrs Clarke said.
The ECB has been clear that it will not tolerate so-called brass plate operations, but Standard Chartered is trying to navigate rules around how they outsource tasks across its own subsidiaries.
It now expects banks such as Standard Chartered to create a dedicated outsourcing unit which the ECB hopes will have "real teeth", Ms Clarke said.
"We expect that onshore in Germany that there will be very strong oversight on anything of any service that is performed offshore," Mrs Clarke said.
While the details are still being ironed out, Mrs Clarke explained that the outsourcing officer might end up making regular visits to sites where activities are outsourced and may "have the ability to change the process if they think it's not appropriate for Germany, for example".
Ultimately, it means banks such as Standard Chartered may end up moving more jobs due to Brexit than originally planned.
"For us, it still won't be hundreds more people because of the size and scale of our business, so you might be talking a few more for us.
"But if they're taking this approach with all other banks who are much bigger than we are in terms of their European business, that could be more significant," she warned.
Mrs Clarke, who is also chief executive of Standard Chartered private bank, explained that staff dedicated to activities such as trade finance processing or document checking currently sit offshore in some of Standard Chartered's business hubs in the likes of Chennai, Kuala Lumpur or Tianjin.
"We rely on that in our global business model, we rely on shared services a lot - either for expertise or for efficiency.
"So they're not against that, but there is lots of scrutiny on it," she said.
The ECB would not comment directly on Standard Chartered's comments, but a spokesman for the central bank said: "The ECB is keen to prevent banks from creating empty shells when granting licences to international banks setting up new subsidiaries in the euro area in the context of Brexit.
"To this end, the ECB will focus on five key areas when assessing licence applications, namely to ensure that subsidiaries have adequate local management capabilities, some access to financial market infrastructures, some hedging and trading capabilities, do not fully rely on intra-group booking and hedging strategies and can provide accurate data on their local activities."
Mrs Clarke said Standard Chartered is "hopefully" in the final stages of its licensing application which it expects to be approved in the coming months.
"There's still quite a bit more work to do frankly. I would be hopeful that if we can navigate our way through some of the latest discussions that we're having with Bafin and the ECB, then end of the summer, early autumn, that would be our target time frame to have the licence."