Managing Brexit in Financial Services

Abstract

English FrançaisThis article seeks to review the major challenges raised by Brexit to UK-based financial services as well as to the European Union. It argues that planning for a no-deal crash-out Brexit has likely diminished the worst risks to financial instability. Over the long term however, Brexit raises significant regulatory challenges, as access to the European market based on 'equivalence' will be far more difficult than the automatic access currently enjoyed on the basis of mutual recognition and passporting. Both the UK and the EU will face costs in this process.Cet article a pour objectif de passer en revue les principaux défis posés par le Brexit aux services financiers basés au Royaume-Uni et à l'Union européenne. Il avance l'idée que les institutions financières ayant anticipé la possibilité d'un Brexit sans accord, les risques les plus graves d'instabilité financière sont moindres. Cependant, à long terme, le Brexit soulève des problèmes réglementaires importants, car l'accès au marché européen fondé sur « l'équivalence » sera beaucoup plus difficile que l'accès automatique actuel fondé sur la reconnaissance mutuelle et les « droits de passeport ». Ce processus engendrera des côuts pour le Royaume-Uni comme pour l'UE.

Assessing London International Financial Center in Double Uncertain Scenarios

“…For EU sides, the passporting gives them opportunities to access the UK-based services. Without that, there will be an increase in borrowing costs for households, firms, and governments, even leading to a reduction of competition in the EU (Sowels, 2019). As a result, the UK decision released on 9 November 2020 confirms that the equivalence decisions to the European Economic Area States will come into effect after the transition period.…”