Category: Brexit

Stay up to date - the Brexit RSS-Feed

Financial Services Post-Brexit: The Age of Equivalence

With Brexit carried out on 31st January, 2020, the clock for the negotiations on the future of the economic relationship between the UK and the EU started ticking aloud. Before bilateral, structured meetings formally kicked off on 2nd March 2020, both sides had already started indirect communication by formulating a Blueprint (PM Johnson) and a negotiation mandate (of the European council for Commissioner Barnier) aiming at setting the scene for later direct talks. Both sides have stated that Financial Services will be on the table, which is not a surprise. If we think of the negotiations as a dinner table, Financial Services would be the Lobster: After use of some tools and techniques (both themselves taking some time to get learned), you get a non-everyday culinary experience (at least for most of us). You will possibly remember a meal for the Lobster served. But If you are hungry and in a hurry, you will probably not choose the lobster, deprioritizing it to the most important target at hand: Not leaving the table hungry.

As of now, Financial Services could well become the Lobster in the Brexit negotiation: The masterpiece of negotiations, but unavailable for time constraints. Instead, it is more likely than not that EU-UK-cross-border financial services from 2021 on will be governed by a concept which is already established in both EU and UK law and will thus not require negotiations: Equivalence.

In this article, we will explain the concept of equivalence, why we consider it the most probable outcome and what this means for the provision of cross-EU-UK-border (cross-border) financial services after the end of the transition period, in the short and medium term.

SRB Brexit-Positionspapier zur Abwicklungsvorbereitung

Das Single Resolution Board (SRB) hat in einem Positionspapier[1] darauf hingewiesen, dass wesentliche regulatorische Vorgaben (wie z.B. an die MREL Quote, Fortf√ľhrungskonzepte, Personalausstattung) ungeachtet des Brexits von Bankinstituten in der EU27 eingehalten werden m√ľssen. Mit dem Brexit wird die europ√§ische Bank Recovery and Resolution Directive (BRRD)[2] ihre Bindungswirkung f√ľr in Gro√übritannien ans√§ssige Institute verlieren. Daher formuliert das SRB seine regulatorischen Erwartungen an Banken, die a) ihre Gesch√§fte, in eines der EU27 L√§nder verlagern (incoming banks), oder b) ihren Hauptsitz in der EU27 haben und ihre Aktivit√§ten in Gro√übritannien oder einem Drittland auf- bzw. ausbauen (outgoing banks).

SRB Brexit position paper to ensure resolvability

The Single Resolution Board (SRB) pointed out in a position paper[1]  that banks have to be compliant with essential regulatory requirements (e.g. for MREL, continuity concepts, staffing) irrespective of the upcoming Brexit. After Brexit the European Bank Recovery and Resolution Directive (BRRD) will lose its binding effect for institutions domiciled in Great Britain.[2]  The SRB therefore formulates its regulatory expectations for banks that a) relocate their operations to one of the EU27 countries (incoming banks) or b) have their head office in the EU27 and establish or expand their activities in Great Britain or a third country (outgoing banks).

Handels- und steuerbilanzielle Fragen bei der Portierung von Zinsderivate-Portfolien zwischen zentralen Kontrahenten

Im Zuge des Brexit entf√§llt das ‚ÄúPassporting‚ÄĚ von Finanzdienstleistungen, und die regulatorische Anerkennung von Finanzdienstleistern im Vereinigten K√∂nigreich in der EU bedarf einer Genehmigung im Einzelfall. Die somit zu erwartende Verlagerung von Finanzgesch√§ften in die EU betrifft auch das Clearing von in Euro denominierten Zinsderivaten (sog. ‚ÄúEuro-Clearing‚ÄĚ). Der nachfolgende Beitrag beschreibt m√∂gliche √úbertragungswege f√ľr bestehende Zinsderivate zu einem zentralen Kontrahenten in der EU und diskutiert die handels- und steuerbilanziellen Folgen.


Commercial and tax balance sheet issues in the porting of interest-rate derivative portfolios between central counterparties

In the course of Brexit, passporting of financial services will no longer apply and the regulatory recognition of financial service providers in the UK require approval on a case-by-case basis in the EU. The clearing of interest rate derivatives denominated in Euros (so-called Euro Clearing) is a market with a nominal volume of approximately 100 trillion Euro in open contracts, which is currently predominantly settled at the London Clearing House (LCH). In the event of a hard Brexit, the European Securities and Markets Authority (ESMA) decided on 18th February 2019 to recognize the LCH as a third party CCP for a limited period of 12 months. A to be expected transfer of financial transactions to the EU, also affects Euro Clearing. The following article by Dr. Christian Altvater, Head of the Group Tax Department of Deutsche Börse Group, and Judith Gehrer, Partner at PwC, describes possible transfer channels for existing interest rate derivatives to a central counterparty in the EU and discusses the consequences for the commercial and tax balance sheets.

Den Artikel von Dr. Christian Altvater und Judith Gehrer (PwC) erschienen in RdF 2019, 65-72 der dfv Mediengruppe finden Sie in deutscher Sprache (in german language) hier.

Die Veröffentlichung erfolgt mit freundlicher Genehmigung der dfv Mediengruppe.

Die Entwicklung der europäischen Kapitalmärkte nach dem Brexit

Es scheint kein Weg mehr daran vorbeizuf√ľhren: Das vereinigte K√∂nigreich wird die Europ√§ische Union offiziell am 29. M√§rz 2019 verlassen, auch wenn es (hoffentlich) zu einer √úbergangsperiode kommt, die den Marktteilnehmern die dringend ben√∂tigte Zeit gibt, sich auf diese noch nie dagewesene Situation einzustellen.

Der Brexit wird die europäischen Kapitalmärkte auf Jahre hinaus beeinflussen. Marktteilnehmer sollten daher die wesentlichen Bestimmungsfaktoren der Kapitalmarktentwicklung nach dem Brexit kennen, wenn sie strategische Entscheidungen treffen.

Zum Start unseres Kapitalmarktblogs stellen wir Ihnen unseren neuen Beitrag zur Zukunft der europäischen Kapitalmärkte vor.

The Development of European Capital Markets Post-Brexit

There seems to be no getting around it: The United Kingdom will officially leave the EU on the 29th of March 2019, even if there (hopefully) is a transition period to smooth the process and give all market participants the desperately needed time to adapt to this unprecedented situation.

Brexit will change European capital markets for years to come. Market participants should know the determinants of Brexit and their impact on Post-Brexit capital market development when taking strategic decisions.

Launching our capital markets blog, we present our new article on the future of European capital markets.

/* */