In a speech to delegates at CityUK and Bloomberg, FCA executive director of international Nausicaa Delfas warned that Brexit could impact contract continuity.
He said that financial businesses needed to ensure contract continuity in the event of no deal being reached over the threshold of March 2019.
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Delfas revealed that the Financial Policy Committee (FPC) estimated that 10 million UK policyholders, 38 million EEA policyholders, and £26 trillion worth of derivatives contracts could be affected.
Contract continuity
Delfas also urged further caution, stating: “However, the types of contracts affected may be broader than this. You in this room will know well how complex these contracts are, involving not only financing and credit agreements, but also hedges against interest rates and currency movements. Our view is that where any of these contracts extend beyond March 2019, the UK and the EU must, together, create contractual certainty, either through an implementation period or by some other means.
“If this is not achieved, there is a risk that some of these contracts could not be appropriately serviced… This would not enhance the integrity of markets, nor serve the interests of consumers, either in the UK or in the EU.”
As well as contract continuity, Delfas was clear that the effect of a ‘no-deal’ Brexit also relates to ‘passporting’, or the transfer of financial regulation across European Union nations. The FCA is working on the establishment of the Temporary Permissions Regime (TPR) in an attempt to resolve the issue.
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By GlobalDataDelfas stated that even if implemented successfully the TPR could not resolve all issues in financial regulation upon Britain leaving the EU: “This work does not necessarily resolve the challenge for all firms, particularly those that need to continue to access the EU – “outgoing business” – as currently there is no reciprocal TPR arrangement from the EU.
“The challenges this presents, in terms of lack of commercial certainty, and business disruption, is clear from my speaking to senior leaders in regulated firms.”
The FCA also launched a webpage entitled ‘preparing your firm for Brexit’. The page is designed to give neutral advice and ‘to make sure they understand the implications of Brexit and plan accordingly’.
Also this month the FCA announced a consultation on the creation of a directory cataloguing the status and history of individuals working in financial services.
