Risks are fading, admits Bank

The financial risks of Brexit are fading as the Government continues to make progress on trade talks and a transition deal, the Bank of england has said.

Its financial policy committee (FPC), which aims to protect the banking system, said it is confident the groundwork is being laid for a smooth departure from the eU.

The Bank suggested that the UK was wellprepared – thanks to advances on a transition deal and laws passed through Parliament allowing cross-border trade.

By contrast, the eU’s lack of preparation in certain areas may make it more susceptible to instability as a result of Brexit.

The FPC said in a statement: ‘Since November, in the UK, progress has been made towards mitigating risks of disruption to the availability of financial services.

‘Nonetheless, material risks remain, particularly in areas where actions would be needed by both the UK and eU authorities.’

Many banking laws and regulations in the UK were drawn up by the eU. There is a risk these will suddenly no longer apply in the event of a ‘no-deal’ Brexit, which could cause chaos.

however, the FPC said the eU Withdrawal Bill which is being examined in Parliament will prevent this from happening.

Firms have also asked for a two-year transition period – meaning nothing would change for them until 2021 at the earliest.

Britain and Brussels have agreed this in principle and could sign it off as soon as next week – giving both parties extra certainty.

Around £27billion of insurance policies – held by ten million customers – could be left invalid after Brexit because the rules they were drawn up under may no longer apply, according to the FPC.

But the Bank said Britain has promised to change its laws so consumers are protected.

The eU has not yet said it will do the same for its 38million insurance customers with policies worth £55billion.

While ministers in the UK have said they will allow banks to use european firms for financial clearing, a service which underpins millions of trades a year, the eU has not made a reciprocal move – leaving the continent at risk of disruption.

The Bank said european firms often rely on the City for these services and without action by Brussels they could be cut off.

Britain has also pledged to make sure european banks and investment firms can continue operating in London, the FPC said.