Withdrawal Agreement Brexit Financial Services

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For example, insurance companies in the UK are already aiming for changes in the implementation of Solvency II at the end of the transition period. The Prudential Regulation Authority, the regulator of the insurance industry in the UK, had previously recognised problems with the risk margin under Solvency II, but was unable to make any changes as this would require an agreement at EU level. 34The worst risks of a Brexit leading to financial stability are likely to be avoided, as regulators in the UK, the EU and possibly elsewhere have investigated them in the event of a no-deal crash. Unexpected problems may still arise, but regulators have been eagerly planning how the Bank of England appeared to be the only body in the UK to have planned a pro-Brexit referendum in June 2016. The idea behind these measures is to ensure contractual continuity and to provide financial service providers on the other side of the Channel with temporary and continuous access, in particular access to euro-denominated derivatives markets in London. Initially, only the equivalence of CCPs and central securities depositories is recognised. The equivalence framework will not apply to other chapters of financial legislation. The framework for the future relationship, which is still under negotiation, includes a chapter on financial services, which sets out market access conditions and specific aspects of financial regulation. 27 At the end of 2016, the consultancy Oliver Wyman produced a highly cited study on the losses to British finance that could result from Brexit. According to the study, banking services benefit the most from the passport and access to the EU market contributes to one fifth of the revenue generated (£23-27 billion).

If the UK`s relationship with the EU were to be based on World Trade Organisation rules, 40-50% of EU-related activities (£18-20 billion in revenue) would be at risk. This, in turn, would be accompanied by job losses in the order of 31 to 35,000 with tax revenues of around £5 billion.25 Today, these figures seem exaggerated and the announcements of the big banks regarding the relocation of companies have so far been rather fragmentary. However, there is a constant number of banks and financial companies announcing the relocation of staff and business activities to various European financial centers. In mid-February 2019, for example, Bank of America announced that it was transferring $50 billion in bank assets to an 800-person operation in Dublin while creating a 500-person trading company in Paris. The total cost of these relocations is estimated at $400 million. Not surprisingly, Bank of America has made it clear not only that its European headquarters will now be in Dublin, but also that “there is no return here. This bridge was pulled upwards. 26 You can find access to all our briefings on Brexit and financial markets in our Financial Markets Toolkit. The EU passport system for financial services will no longer be valid in the UK.

The continuation of activity in the United Kingdom would initially fall under the temporary authorisation scheme, even in the event of a withdrawal without an agreement. The UK government plans to grant a three-year temporary authorisation, allowing EU financial institutions to continue operating while adjusting their group structure and obtaining permanent approvals and recognition from UK regulators. .