Brexit and Financial Services
As we go to press the result of the UK-EU referendum has generated significant uncertainty and this is felt particularly acutely in the financial services sector.
The Passporting Regime
Under the passporting regime firms in the UK can use their UK authorisation to provide a range of investment, banking, insurance and related services across the EU. This can be done on a cross border basis or by establishing a branch in other member states.
Many non-EU financial services institutions have established authorised businesses in the UK to benefit from these passporting rights. Passporting does of course operate not just for the benefit of the UK. Financial businesses in the rest of the EU benefit from access to the UK financial services sector which is of significant size and strength.
The likely way ahead
As our readers may have noticed there has been extensive media reports speculating on the best way forward for the UK post-Brexit and the extent to which the remaining members of the EU may or may not co-operate in allowing the UK continuing access to the EU single market. Much of this commentary has been speculative and misguided. Once the initial media frenzy has died down many of our clients in the financial sector anticipate a sensible deal being concluded. The UK is not a peripheral player in the European market.
It is the leading centre for financial services in Europe. Many of its institutions dominate their markets. The country has extensive expertise, a highly skilled pool of labour and long established financial services trading connections with the leading non EU markets of the United States and Asia. The remaining member states of the EU have a significant vested interest in ensuring their continued access to the UK market and the continued participation of UK institutions in European financial markets and superstructures. There are a number of potential ways ahead, none of which may be entirely satisfactory.
- One is for the UK to join the EEA to take advantage of the passporting which membership confers. This would require compliance with the existing EU regulatory framework without the right to have a say in the development of new rules and regulations.
- Another option would be for the UK to take advantage of existing and anticipated procedures for “third country” firms to access EU markets. This though does not provide comprehensive access for all mainstream financial activities.
- Finally, the UK could also enter into a series of bilateral treaties, though this would be a lengthy and complex process.
Over the next few months it is hoped that the picture will become clearer.
This article was written by Jonathan Bayliss. For more information please get in touch via firstname.lastname@example.org or +44 (0)20 7427 6699.
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