Brexit to Drive Financial Sector onto the Continent
The UK’s departure from the EU, Brexit, will take place one year from now on 29 March 2019. Based on the latest information on the negotiations, the UK’s departure will be followed by a transitional period lasting until the end of 2020, but how ‘hard’ Brexit will end up being is still a subject of speculation. Save some kind of miracle, the UK will completely depart the EU internal market at the latest after the end of the transitional period, at which point the UK will from a regulatory standpoint become an outside state comparable to the USA.
From the perspective of the financial and insurance markets, this will mean that thousands of investment firms, funds, banks and insurance companies will lose the right to offer their services from the EU to the UK and vice versa.
London will remain one of the world’s largest financial centres after Brexit, but regulations will complicate the financial sector’s operations in the EU. Financial sector companies will have to establish and obtain licences for subsidiaries on the continent. Many companies have already begun this process. It will take time for a political understanding to become a binding agreement, and the transitional period involves many uncertainties. This has led many supervisory authorities to require that applications for EU operating licences be submitted by the end of June this year.
Just having a mailbox in continental Europe will not be enough, as the EU’s financial supervisory authorities are taking a harder line towards screen companies. The EU requires that subsidiaries have real business operations and responsible personnel residing in the EU. It will not be possible to run a company remotely from the UK.
Brexit and other market changes and regulatory projects affecting the EU’s financial sector are no doubt causing many of our clients a great deal of concern. We are a strategic advisor that understands our clients’ business and can help them navigate this shifting regulatory landscape and identify the opportunities that these changes will bring.