“I’ve pushed hard for the EU Commission to start preparing for a no-deal Brexit,” Rasmussen said in an interview on Friday. “They may well be doing that, but they didn’t put a great deal of effort into it.”
Rasmussen voiced the concerns despite a recent EU pledge that banks will have access to London-based clearinghouses even if Brexit negotiations break down. The EU has said that such a fix, which would be based on so-called equivalence rules that let non-member countries provide services to the single market, would be short-term.
Not Enough
Banks and U.K. regulators have been warning for months that EU action is needed to avert the financial-market turmoil that could ensue in a no-deal Brexit. Jesper Nielsen, who is interim chief executive officer at Danske Bank A/S, said the main worry for his industry remains the question of clearing. Assurances to date that the EU is working on the issue are welcome, but not enough, he said.
For Denmark, which is home to the world’s biggest covered-bond market, the concern is whether banks will have uninterrupted access to clearing euro-denominated interest rate derivatives. Ulrik Nodgaard, the head of the Danish bankers’ association, said that when it comes to Brexit, this is the “one key issue” for financial firms in his country.
“We’d very much like some assurance,’’ he said. “This is our cliff edge.’’ [...]
“We would really like to see the EU and ESMA start to work on this,” Nodgaard said, referring to the European Securities and Markets Authority. He says he’s asked Rasmussen to put pressure on the EU to fix the issue. Denmark’s bank industry wants to see a “transitional regime that will at least ensure that derivatives already in the market can stay in London,” he said.
The Wish List
“Preferably, we’d like to have an equivalent regime with London being under the same regulation the same way it is today,” Nodgaard said. “Obviously, making such a decision takes lots of preparations and sorting of formalities so we’d like to encourage that that work gets underway.”
For Danske, Nielsen also pointed to the issue of the Irish border, which has emerged as the most thorny aspect to Brexit talks.
“A hard Brexit will hit our business very hard because we have a bank in Belfast and our remaining Irish operations in Dublin,” Nielsen said. “So we’ll have to operate in across the border, while there are lots of issues with agreements on how to operate financial companies across the border while our Northern Ireland bank has many clients south of the border.’’ [...]
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