Get ready for hard Brexit, firms warned

Banks, insurers based in UK could face abrupt end to EU market access

Britain’s banks and insurers must plan for a “hard” Brexit in case a transition period is not in place in March, a senior British regulator said on Thursday in a warning echoed by Brussels.

“With eight months until we exit the European Union in March 2019, it is important we all – regulators and industry – continue to plan for a range of scenarios,” Nausicaa Delfas, head of international strategy at the Financial Conduct Authority, said.

“Across the FCA, together with colleagues from the Bank of England and the government, we have been working to develop a number of safeguards and contingencies, in the event of a hard Brexit, to ensure that ‘day 1’ works smoothly,” Delfas told an event held by TheCityUK.

Britain and the EU have agreed on a transition deal bridging Brexit in March 2019 and the end of 2020, but it has yet to be ratified, meaning financial firms based in Britain could face an abrupt end to EU market access. EU banking, insurance and markets watchdogs have already warned their respective sectors to be ready for a hard Brexit.

The bloc’s executive European Commission told EU states on Thursday to intensify preparedness for a potentially disruptive Brexit.

Britain has said it and the EU should act to ensure that cross-border financial contracts such as derivatives and insurance policies can still be serviced after March, but the EU reiterated on Thursday that it would not legislate for now.

It is unclear what sort of EU market access financial firms in Britain will have after the transition period ends, prompting many banks and insurers to have new hubs up and running in the bloc by in March to avoid potential disruption.

A group of eight EU states also called for a redoubling of efforts to build a capital markets union in the bloc to provide stable and cost-effective funding for EU companies, given that Britain, Europe’s biggest financial centre, is leaving.

Britain wants future financial services trade with the EU based on an enhanced version of the bloc’s basic “equivalence” regime used by Japan, Switzerland and the US.

Brussels alone grants access to foreign firms if it deems that their home country rules are equivalent or aligned enough with those in the bloc.

Britain says this is one-sided and wants changes to make it more predictable and transparent. The EU is amending the regime, but its alterations would make it tougher on big foreign trading and clearing firms like those found in the UK’s financial sector.

Hugh Savill, director of regulation at the Association of British Insurers, said that even with enhanced equivalence, the EU’s imperialist approach to rule-making would have a chilling effect on how UK regulators could supervise markets and consumers.

Boris Johnson has declared it is not too late to save Brexit as Britain must be spared the “democratic disaster” of Prime Minister Theresa May’s Chequers plan.

In a devastating first parliamentary speech since his resignation as foreign secretary, he said her Chequers proposal would leave the UK in a miserable permanent limbo and economic vassalage to the EU.

May could still fix Brexit, he said, if she returned to the vision set out in her Lancaster House speech 18 months ago.

In a clinical dissection of May’s Chequers plan, Johnson said her blueprint would make it harder to do free trade deals.

Johnson, who championed a customs deal that used new technology and trusted-trader schemes to avoid a hard border in Ireland, said May had instead adopted “a fantastical Heath Robinson customs arrangement”.

‘It is important we all continue to plan for a range of scenarios’

Nausicaa Delfas FINANCIAL CONDUCT AUTHORITY STRATEGIST