Brexit , Financial Services and an EU Perspective
Worries about the consequences of a "no deal" Brexit apply in the EU as well as in the UK, certainly in the financial services sector.
On 13th November 2019, the European Central Bank ( "the ECB") issued an announcement urging banks to speed up their preparations for a "no deal" Brexit.
The ECB is evidently concerned that regular extensions of the Brexit notice period are inducing battle fatigue in banks and in their preparations for a "no deal" Brexit. This concern also extends to the possibility of Brexit occurring even with a withdrawal agreement in place, bearing in mind that the currently proposed transition or implementation period extends only until 31st December 2020.
The ECB states in its announcement:-
"Delays to banks' implementation of their Brexit plans give rise to heightened operational risk."
The ECB highlights necessary changes to banks' IT systems, operations and organisational set-up which banks have yet to complete as well as delays in transferring assets and customer accounts from the UK to the EU if banks want to retain the benefit of the EU single market. It may be a tribute to the exceptionally high level of expertise in the City of London on financial services' matters that makes banks reluctant to move substantial parts of their UK operations elsewhere but it may also be a message to the politicians in both the EU and the UK that enough is enough and that they need to come up with a solution that avoids the mess of an unstructured Brexit.
In a separate development, the Association for Financial Markets in Europe (AFME), together with 13 other trade associations ( many of them based in the EU), wrote to the European Commission asking the Commission to extend the period for temporary equivalence and recognition of so-called UK central counterparties (CCPs) beyond the current expiry date of 30th March 2020. The trade associations argued that this temporary equivalence and recognition regime should continue at least until three months after such time as the European Securities and Markets Authority (ESMA) has completed its review under the European Market Infrastructure Regulation (EMIR) 2.2of existing recognition decisions for non-EU central counterparties. This would enable UK CCPs to comply with or adapt to the new recognitions regime under EMIR 2.2.
This is all very technical stuff but it does illustrate the work that has to be completed by the financial services sector from the EU perspective and not simply the UK perspective to ensure as smooth a flow of international financial services business as possible between the EU and the UK post-Brexit.
Some people feel that change will produce new energy whilst others lament that trying to fix business systems which are flourishing and not broken is a complete waste of energy.
"You pays your money and your takes your choice", as the old saying goes!
