Financial services – evolving policy and advocacy from the UK
While some firms have made statements to the press regarding the contingency plans they have developed in relation to Brexit (and may or may not trigger), the industry has also relied on its trade associations to develop research and communicate their evolving response to the challenges that Brexit presents.
The Association for Financial Markets in Europe (AFME): In February 2017, AFME published a report it had commissioned from PwC which, taking a granular and fact-based approach, outlined the transformation challenges that Brexit poses to banking services. Building on this, AFME issued a further report aimed at policymakers in April 2017, entitled Implementing Brexit: practical challenges for wholesale banking in adapting to the new environment.
The British Bankers Association (BBA): The BBA’s CEO, Anthony Browne, has made a number of often quoted comments to the press including a warning that banks’ ‘hands are quivering over the relocate button’ – a position he seemed to have distanced himself from when he spoke at the BBA’s annual Mansion House dinner in November 2016, when he reportedly said: ‘We should stop looking back, roll up our sleeves and look to the future.’ Most recently, writing in the Telegraph in relation to the Great Repeal Bill and the legal challenges Brexit presents, he proposed that the legal process should be guided by three priorities: 1) complete the process in a two-year period (to ensure the UK does not fall into a legal black hole); 2) ensure that regulation is not transposed in a way that compromises the UK’s negotiations to get full access to the EU market; and 3) ensure that the reforms that have been important to restoring financial stability after the 2007 crisis are not undone.
The BBA website includes an information page on Brexit but it does not include position papers like that prepared for it by the Global Counsel (an advisory group chaired by Lord Mandelson) and the law firm Clifford Chance.
TheCityUK and International Regulatory Strategy Group (IRSG): TheCityUK and the IRSG (an advisory body to both the City of London Corporation and TheCityUK) have now published three separate reports on Brexit: The EU’s third country regimes and alternatives to passporting (23 January 2017), Brexit and UK-based financial and related professional services (12 January 2017), and UK financial and related professional services: meeting the challenges and delivering opportunities (3 August 2016). Together these three reports help to document the City’s changing position on market access which has yet to solidify, as reflected in TheCityUK’s suggestion, on the one hand, that the UK and EU agree a framework for the mutual recognition of regulatory regimes, building on and going beyond the existing equivalence regime, and the IRSG’s suggestion, on the other hand, that the UK consider mutual access with the EU that avoids having rights of access tied to the existing concept of equivalence. The IRSG has also published a report on Central Counterparties (CCPs) post-Brexit and the implications for banks and end-users.
Financial Services EU Task Force: Financial News reported that this task force had begun operating as a sub-group of TheCityUK. As reported by Reuters, it will focus on high-level coordination and strategic input to support detailed work by TheCityUK (and the trade associations that are members or are in dialogue with it).
The task force is made of the following top officials of major financial institutions:
- Shriti Vadera (chair) – a former government minister and current chairwoman of Santander UK bank
- Douglas Flint, chairman of HSBC – to lead on commercial banking
- Norman Blackwell, chairman of Lloyds, and David Roberts, chairman of Nationwide – to lead on retail banking
- Rob Rooney, chief executive of Morgan Stanley International, and Michael Cole-Fontayn, chairman of BNY Mellon in Europe – to lead on wholesale banking
- Adrian Montague, chairman of Aviva, and John Nelson, chairman of Lloyd’s of London – to lead on insurance
- Howard Davies, chairman of RBS, and John McFarlane, chairman of Barclays – to lead on cross-sectoral issues
- Liz Corley, vice-chair of Allianz Global Investors – to lead on investment management
- Gerry Grimstone, chairman of Standard Life and Mark Boleat, policy head of City of London Corporation – to lead on international advocacy
Financial Services Negotiation Forum (FSNF): This group aims to bring together senior financial services professionals from the ‘Leave’ and ‘Remain’ sides, and give a voice to smaller firms in particular, as well as to financial services companies outside London. Its goal is to provide a platform for industry practitioners and policymakers to share and debate evidence-based research and to agree a consensus on critical issues relevant to the Brexit negotiations.
On 16 January 2017, it published Euro-clearing and Brexit: The Practitioners’ View which suggests it could be in the best interests of the EU for clearing of these products to continue outside the eurozone and that the UK should offer an enhanced collaborative arrangement (i.e. effectively shared oversight) to the European Central Bank (ECB).
Buy- and Sell-side Trade Associations inside and outside the UK: Although the work of these various associations is not always public (and is normally technical in nature) many, such as the Futures Industry Association, are also looking at the implications of Brexit for financial institutions that currently passport from the UK to the EU27 member states, and those that passport into the UK from the other EU27 member states.
It is notable that, as reported by the FT, the Alternative Investment Management Association (AIMA) with the Alternative Credit Council (ACC) have arrived at a position on Brexit with their respective memberships. While neither group has made their joint position papers public, AIMA’s CEO has summarised – on LinkedIn – the position paper directed at the UK government. Several recommendations are made including one ‘to maximise single market access for the entire financial services sector, by hardwiring into a treaty the principles of market access based on equivalence, non-discrimination and reciprocity’, but not at the expense of ‘retaining some flexibility for the UK to set rules for domestic and internationally facing business’.
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