However, it warned that “some disruption” remains a possibility for EU-based clients, although this would not pose any risk to financial stability.
The UK’s financial services
industry has mitigated most Brexit risks for continuing cross-border business,
even if the UK and EU fail to reach agreement over the future of financial
services once the transition period expires at the end of 2020, said the Bank
of England’s Financial Policy Committee (FPC). However, it warned that “some
disruption” remains a possibility for EU-based clients, although this would not
pose any risk to financial stability.
“Some EU-based clients and customers may not
have access to all existing services after the end of the transition period,”
the committee said. It added that UK banks had begun to notify clients that
certain retail banking services would not be available after transition.
As it stands, that would replace transition arrangements in place
for 2020. “Banks and other financial institutions have made further
preparations for the end of the transition period. And it is important that
they continue to do so to minimise the risk of disruption,” the bank said.
Insurers with significant
cross-border business have set up new subsidiaries in Europe to bypass the risk
of a no-deal Brexit and the FPC said restructuring will allow of the £60bn of
EU liabilities to continue to be serviced.
The FPC said two thirds of UK
banking clients have completed documents that will allow them to enter into
derivative trades with EU entities. But the FPC warned that the number of
clients actively trading in the new entities is “materially lower” and “some
operational risks therefore remain, including if many clients seek to migrate
to the EU entities in a short period of time”.
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