The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Financial Institutions Regroup to Consider Outcomes of Brexit

After the shock of last week’s ‘leave’ vote in the European Union referendum and a weekend to reflect on the outcome, financial institutions across the UK are considering big picture scenarios that could result from Brexit and putting together governance frameworks designed to help them manage events as they unfold.

While there is no certainty on exactly when and how the UK will exit the EU, there is certainty that both UK and European financial regulations will endure until negotiations are complete either within or outside the two-year time window provided by Article 50 of the Lisbon Treaty.

Among key EU regulations that are already in place and must be sustained are the Alternative Investment Fund Management Directive (AIFMD), which aims to create a level playing field for the operation of alternative investment funds in Europe, Solvency II, which is designed to promote harmonisation of European insurance regulation, and European Markets Infrastructure Regulation (EMIR). Looking ahead, Markets in Financial Instruments Directive II (MiFID II), which will transform trading and transparency across European financial markets, is scheduled to take effect in January 2018.

While Brexit could ostensibly release UK firms from the requirements of these regulations, the UK will need to put regulation of a similar standard in place if and when arrangements are made to continue trading with EU countries.

Clearly, the long term impact of the decision to leave the EU on the overall UK regulatory framework will depend on the relationship the UK makes with the EU in future. The worst case scenario with the biggest impact will be the withdrawal of UK access to the single market and the end of the financial passport system, making the UK subject to the same rules of trading with the EU as countries such as the US, Canada and Singapore. The only let out here, perhaps, will be to set up a trading vehicle in one of the remaining 27 EU countries as a means to trade in the single market.

Whatever the outcome of Brexit, the cost of regulatory change across UK financial markets will be high, with think-tank JWG recently suggesting it could run to £17 billion over 10 years. Meantime, and despite the years of uncertainty Brexit is likely to cause, financial institutions are working to regain a sense of normality and a return to business as usual.

Related content

WEBINAR

Recorded Webinar: How to establish data quality and data governance for analytics

Data quality has been a perennial problem for financial institutions for many years, but this needs to change as firms become increasingly reliant on accurate analytics to deliver business opportunity and competitive advantage. New approaches to data quality can help firms up their game and significantly improve their analytics capability. Adding the processes, controls and...

BLOG

Bracing for More Change in Trade Reporting

By Mark Steadman, Executive Director, Head of DTCC Report Hub Services. In the wake of the 2008 financial crisis, regulations governing the reporting of transactions across key asset classes have been implemented in major jurisdictions around the world. This complex thicket of rules is set to become even more complicated and costly for firms’ as...

EVENT

RegTech Summit Virtual

The RegTech Summit Virtual is a global online event that brings together an exceptional guest speaker line up of RegTech practitioners, regulators, start-ups and solution providers to collaborate and discuss innovative and effective approaches for building a better regulatory environment.

GUIDE

Entity Data Management Handbook – Seventh Edition

Sourcing entity data and ensuring efficient and effective entity data management is a challenge for many financial institutions as volumes of data rise, more regulations require entity data in reporting, and the fight again financial crime is escalated by bad actors using increasingly sophisticated techniques to attack processes and systems. That said, based on best...