13 November 2020

FT: City regulator warns on three Brexit ‘cliff-edge’ risks

The UK financial regulator’s head of Brexit preparations has warned that banks and investment groups still face three “cliff-edge” risks when the transition period for leaving the EU expires in seven weeks. Speaking at Thursday’s City & Financial summit on post-transition regulation, Nausicaa Delfas, the Financial Conduct Authority’s executive director of international, said issues with derivatives trading, the transfer of personal data and offering services to customers in the EU remained a real possibility after January 1. “We should not assume, even if a deal is agreed, that it will mitigate outstanding risks in financial services,” she said.

The first two of those threats could yet be addressed by a last-minute deal with the EU, she said. Earlier this week, chancellor Rishi Sunak announced that the government would recognise many areas of EU financial regulation as sufficiently tough as the UK’s own standards from January, a process known as equivalence. That will enable UK-based banks and fund managers to continue accessing EU exchanges, benchmarks and services. He said the UK was “acting unilaterally to provide clarity”.

Brussels has held back, seeking more clarifications from the UK over whether it will stray too far from European norms. It will only let EU institutions access UK markets if it is “in the EU’s interests”. Without a reciprocal approach, Ms Delfas acknowledged that brokers and fund managers could suffer. “In the absence of mutual equivalence, some firms will be caught by a conflict between the EU and UK derivative trading obligations, potentially hampering their ability to trade derivatives where they see fit,” she said.

FT

© FT plc