The financial services industry has been one of the hardest hit by the Brexit process, not least due to the volatility in the British pound’s exchange rate. The biggest concern for companies however has been the likely loss of free market access between the UK and the rest of the European Union, which may force them to relocate business to the EU.
With the ongoing Brexit negotiations casting a big shadow over the future business dealings of firms operating in the UK, the news that London has finally agreed that it needs to pay a settlement bill is welcome.
The UK has finally put down on paper that it needs to pay the cost of leaving the European Union. This cost is termed as the Brexit bill and though the amount is not exactly clear as yet, estimates range between 40-100 billion euros.
Regulatory Equivalence Clauses
Retail brokers regulated by the UK FCA are yet to gain certainty about their operations in a post-Brexit world. While the MiFID II agreement is proceeding as scheduled, passporting of financial services makes sense.
Equivalence clauses with regulators outside of the EU are a good case for expecting that the bulk of the financial services industry can be governed by the same regulatory framework and firms can retain single market access. Asset management, banking, insurance and market infrastructure are subject to equivalence in a number of cases, giving hopes to FCA-regulated companies that they might after all retain most of their infrastructure in London.
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The issue has been a contentious one during the run-up to Brexit negotiations. Any resolution on this matter could be a blessing in disguise for financial services providers that are based in London, including retail brokers.
In exchange for paying a settlement fee, the UK may get the upper hand in demanding a continuation of regulatory passporting of financial services between the UK and the European Union.
Hello Frankfurt, Paris and Dublin
In the meantime British banks are continuing to fret over Brexit and mainstream news outlets continue flashing headlines about job relocations to Frankfurt, Paris and Dublin.
So far major financial institutions have committed to moving 2,600 jobs away from the City. UBS and Goldman Sachs are committed to the capital of German finance, while HSBC and Society Generale are focusing on France. Barclays has been contemplating moving 150 jobs to Dublin, while the big guns in the industry, JPMorgan and Deutsche Bank, are yet to make a commitment.