UK financial services need greater clarity on the government’s Brexit plan, Baroness Falkner of Margravine, chair of the EU Financial Affairs Sub-Committee said in an interview with InvestmentEurope.
Commenting on a report released by the House of Lords this weekend, Baroness Falkner expressed concern that calculations behind the Brexit negotiations appeared to be “political, rather than purely economic, in the broader negotiations.”
She also criticised the government’s lack of clarity around implementation period. “An implementation period suggests that you have a plan, it would be a period where an agreement has been made and you are giving institutions time to implement it, for example in the case of Mifid II. But what are they going to implement here?”
“Mr Davis has indicated that further information on the agreement for financial services won’t be negotiated until October or November this year, and even then, it will be a bare bones agreement.
“But financial institutions don’t have time to wait, the Prudential Regulation Authority required businesses to submit contingency plans by July 2017 and one year on, could ask for an update. Firms have an obligation to their shareholders to avoid excessive risk, they can’t wait until April 2019 to discover that they have no licence to trade in Frankfurt” Baroness Falkner argued.
Over the last three months, the EU Financial Affairs Sub-Committee has listened to witness statements from stakeholders in the financial industry discussing the impact of Brexit, ranging from lobby groups such as City UK and UK Finance to academics, law firms and executives at financial institutions such as Barclays and JP Morgan.
According to Baroness Falkner, the witness statements have overwhelmingly stressed the urgency of a government decision to develop a transition agreement, to the extent that the Committee saw the need to contact the Chancellor with demands for an agreement even before the report was completed.
In the meantime, the report also stated that the PRA’s planning now focused on mitigating the effects of exiting the EU without a formal exit deal.
Based on the witness statements provided by industry stakeholders, the report also argued that with regard to a number of financial services regulations, most notably Solvency II and fintech rules, regulatory autonomy from the EU could be beneficial.
David Davis, the UK’s secretary of State for Exiting the European Union will appear in front of the House of Lords next week to discuss among others whether the initial phase one agreement with Europe is binding, when phase two of the negotiations will begin.