Brexit & financial services

Financial Services are of especial importance to the UK economy. The vote to leave the EU at an as yet unspecified date has significant implications for the financial services sector. The degree of inter-linkage between the ‘City’ and the EU economies is substantial, economically speaking, and intricate in terms of the legislative interface. There is precious little certainty over what will happen next. With respect to the regulatory framework, the new chief Executive of the FCA confirmed that whilst the FCA had set up an internal Brexit unit to deal with Brexit specific activity, its main work remained unchanged. Many of the FCA rules were derived from the EU and the FCA would continue to enforce existing rules and work to implement ones that had been agreed, but which were not yet in place. For the Regulator therefore it was ‘business as usual’. Along with most other industrial and commercial sectors the more considered reaction of the industry to any question is “it all depends”. In the absence of any clear guidance on what the EU negotiations will lead to in terms of the treatment of services, commentators have largely been reduced to guessing what large institutions intend to do from their pre vote statements and matching these to the permutations of different possible negotiation outcomes. In a sector with different interests and priorities and with a wide range of possible outcomes, the possible permutations of outcomes is very high. The debate and commentary has been largely framed around whether banks and other would stay (in London) or go. Informing this choice has have been two issues: timing and the likelihood of continued ‘passporting or equivalence. Despite one banking commentator saying that most banks had their “hands are quivering over the relocate button” currently, only one bank and the European Banking Authority have said that they are leaving.