The BBA is now integrated into UK Finance. Please go to www.ukfinance.org.uk for new content and updates from UK Finance.
Material published by BBA prior to 1st July 2017 is still available on this website.
From 1 July 2017, the finance and banking industry operating in the UK will be represented by a new trade association, UK Finance. It will represent around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation will take on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association.x
Written by David Northern, Partner, Parker Fitzgerald
So, what do we know? Britain has voted for Brexit. Markets have experienced high levels of volatility, with sharp falls in sterling and a downgrade in the UK’s credit rating. There are genuine fears that a prolonged period of economic and political instability will cause a UK and potentially a global recession – as the systemic impact of the turmoil threatens an increasingly interdependent world.
The length and nature of this uncertainty is dependent on key political events over the coming months including, the Conservative party leadership election and the timing of article 50 invocation by the UK government as negotiations begin between the UK and the EU, which will in turn have implications for financial services in the UK. Whilst many foreign institutions have UK presence to participate in the UK financial market, a large number of non-EU financial institutions also use the UK as a hub to access clients and markets across the EU. Many EU firms also maintain branch presences in London.
In this article, Parker Fitzgerald explores the landscape for short-term and long-term risks for UK based banks and the relationship with the EU, and sets out five scenarios for the Post-Brexit trading and regulatory framework: no change, the UK to become a member of the EEA (with EFTA membership), become part of the European Free Trade Association (EFTA) without the EEA, a third party or WTO model and the ‘Soft Landing’ of Associate Membership.
Understanding the strategic and operational impacts of each scenario will be key to determining the on-going viability of operating models and will also be a key input into decisions on issues such as operating locations, legal entity structures and long-term customer strategy. As part of the EU, the UK has been able to use its expertise to influence the development of the EU financial services framework.
To the extent the post-Brexit model that is adopted prevents the UK from being able to continue to exercise this influence on applicable new EU measures and initiatives it may have a detrimental impact on the UK’s financial services industry at least to the extent it wants and can offer services in the EU. Equally, Post-Brexit, given the UK’s commitment to global reform in the financial services industry, it is difficult to see how the UK could or would substantially deviate from the initiatives that are already finalised or underway.
In direct response to the decision for the UK to leave the EU, Parker Fitzgerald has launched a new practice comprising of economists, former regulators and industry specialists who can provide clients with thorough analysis, strategic advice and execution support as developments unfold over the coming weeks and months. Additionally, we have designed a bespoke assessment framework and programme template for UK and international banks to help guide implementation effort at each stage of the EU disengagement process – which may well prove to be a very significant undertaking for an industry already dealing with an unprecedented level of change.