AFME: Planning for Brexit – Operational impacts on wholesale banking and capital markets in Europe

AFME has commissioned a report from PwC, outlining the operational impacts and transformation challenges that Brexit poses to the provision of banking services in the EU.

The study aims to provide policymakers and other industry stakeholders with a granular, fact-based exposition of the steps that firms are planning to take in order to maintain uninterrupted service to the users of wholesale banking and capital markets services in Europe during and following Brexit.

Key findings of the report include:

  • the Brexit process will be highly complex for wholesale banks and covers many interdependent activities.  Firms providing a significant proportion of current industry capacity will need to execute transformation programmes which will extend beyond Article 50 timescales and in many cases up to five years; or even longer if the post-Brexit trading relationship between the EU and UK remains unresolved for a protracted period.
  • in executing their transformation programmes, banks will be heavily dependent upon timely approval of licenses by new EU regulators.  This represents a critical step in the implementation of new business models and is likely to occur at a time when regulators will see a peak in requests following Article 50 activation.
  • banks are currently proceeding with two-year tactical plans to maintain continuity of service.  However, these plans are likely to be sub-optimal for clients and market effectiveness, and will be dependent on reaching agreement about an interim business model that is acceptable to their new EU27 regulators and can be put in place before the UK leaves the EU.

In order to assist the wholesale banking and capital markets industry support European corporates and continue to help growth across all of Europe the report recommends that policymakers:

  • clarify with industry participants as soon as possible the structure of any interim business models that may be deemed acceptable immediately post-Brexit.
  • set out as soon as possible any future permanent terms for the provision of wholesale banking and capital markets services between the UK and EU post-Brexit.
  • following Brexit and agreement of any new market access arrangements provide an implementation period of at least three years to allow banks to complete their adaptation, and ‘grandfather’ transactions that are in force at the time that the UK leaves the EU.

Click here to read the press release.

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