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How Will Brexit Affect the Financial Services Sector? | Industry Experts at Infiniti Research Reveal the Key Impact and Challenges
[May 15, 2019]

How Will Brexit Affect the Financial Services Sector? | Industry Experts at Infiniti Research Reveal the Key Impact and Challenges


A well-known market intelligence company, Infiniti Research, has announced the completion of their recent article on the impact of Brexit on the financial services industry. This article analyzes the impact of Brexit on the financial services sector and what needs to be done next. It also highlights the key challenges that companies in this sector could face as an aftermath of brexit.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20190515005651/en/

What are the main challenges of Brexit for the financial services industry? (Graphic: Business Wire)

What are the main challenges of Brexit for the financial services industry? (Graphic: Business Wire)

After four decades of continuous membership, the United Kingdom is all set to make an exit from the EU. This will be one of the most complex demergers ever contemplated and could have severe impacts. It includes the potential disruption to the lives of millions of European nationals living outside their home country, the disruption to complex supply chains in sectors such as automobiles and aviation, and the disruption on capital flows in the financial services industry.

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What are the main challenges of Brexit for the financial services industry?

Passporting


Presently, a company in the financial services industry that is licensed in one EU member state can in principle conduct business throughout other countries in the EU by passporting their license across national borders. If the UK decides to stay in the European Economic Area (EEA), companies in the financial services industry may continue the passporting of their licenses. However, the scenarios where UK seeks temporary EEA membership for a smooth exit from the EU should not be completely ruled out.

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Mutual recognition

During the early negotiation phase of Brexit, the British government preferred to establish a mutual recognition system. This was an agreement between parties to maintain comparable rules to accept each other's findings as binding in their own city. For companies in this financial services industry, this would require the establishment of a bilateral body that jointly agrees to objectives including financial stability, consumer protection, and dispute management.

Equivalence

Given that the UK and EU are at a point of perfect regulatory convergence, it provides a means by which firms established in the country could continue to operate cross-border, post-Brexit. Equivalence is likely to be the foundation of UK's financial services agreement, with the UK seeking a declaration that the city of London is fully equivalent to the European Union by reference to a common legal and regulatory framework. This translates to the fact that a deep understanding of both the functioning and limitations of this framework is a pre-requisite for post-Brexit regulatory management.

Relocation

Relocation is another option available to companies in the financial services industry who are conducting cross-border activities. Firms in the financial services industry that have their headquarters in London could consider opening a licensed EU headquarters in an EU-27 member state. If the backbone of the future UK-EU agreement is equivalence, then those activities for which equivalence is not permitted would be subject to relocation, possibly with legacy book transfer.

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About Infiniti Research

Established in 2003, Infiniti Research is a leading market intelligence company providing smart solutions to address your business challenges. Infiniti Research studies markets in more than 100 countries to help analyze competitive activity, see beyond market disruptions, and develop intelligent business strategies. To know more, visit:https://www.infinitiresearch.com/about-us


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