May's gamble to secure an absolute majority ended up in a hung Parliament that may yet change the UK's stance in Brexit negotiations. The EU27 toughened its language in the Council authorisation for starting the Brexit talks. ESMA's plan to ban “letterbox” entities signals real trouble for the City.
Graham Bishop/Paula Martín
Organised by the Centre for the Study of Financial Innovation (CSFI), hosted by Grant Thornton with co-presenterPeter Snowdon (Norton Rose Fulbright)
This blog covers the key subjects since our last meeting that I hoped to cover but, as always, we ran out of time to deal with them all. As a Friend, you can watch the 23rd `structured’ CPD web-cast with CISI. These Notes may be read to record a further 30 minutes of `structured CPD’, including a dipping into the links to the underlying stories.
Highlights from the “Brussels for Breakfast” meeting
The General Election in the UK may have “changed the game” here but there are two sides to the Brexit negotiation. The election of President Macron in France – and now his landslide majority in the Assemblée Nationale - has changed self-confidence in Europe as populist forces seem to be in retreat, re-enforced by the collapse of support for Italy’s Five Star Movement in local elections. Moreover, the Eurozone economic upswing seems to be accelerating gently while the UK economy is slowing. The boot seems to have shifted perceptibly to the other foot!
If the election has reduced the chances of a brutal/hard Brexit, would a “soft” Brexit save the City? Sadly, the feeling seemed to be probably not. Banks that have now investigated alternative locations around the EU are now wondering why they never did this before as things are not as awful `over there’ as they had feared. The policy of “no deal is better than a bad deal” means that any transitional arrangement would be very last minute. Firms cannot wait to that last minute as the issue of a banking licence can easily take a year – implying that serious decisions must be taken in the next few months. We discussed – yet again – that `free trade agreements’ usually exclude financial services anyway.
Derivatives clearing remains a totemic topic – especially as we waited for the Commission’s proposal on location of clearing. Whatever the possibilities of clever legal stratagems to contract regulation out of the UK, the financial stability issues are likely to remain paramount as the size of potential calls for euro-denominated liquidity are immense. [...]
These Notes for the Friends of Graham Bishop will be supplemented by our full Workbook for our CPD clients (link) – in conjunction with the 30-minute CISI webcast. Our new Brexit &UK service (link) provides further detailed news on relevant developments in financial services.
Key items in the rest of the month’s news included:
May’s bid to secure a ‘strong and stable’ leadership to strengthen her hand in Brexit talks ended up in tears on June 8th after the Conservatives failed to achieve an absolute majority and the UK woke up the morning after to a hung Parliament. Jeremy Corbyn’s Labour party did better than expected and the Socialist leader has been found in a Survation poll to “make a better PM” than Theresa May, with Labour 5 points ahead of the Tories if a new election were called. Former Chancellor George Osborne told the BBC May was a “dead woman walking” after surveys showed that nearly half of the public expects her to resign, and her fall is very likely as we write – with Tories calling for Boris Johnson to take the reins.
Once the new government is formed, one of its first and most pressing matters will be the Brexit agreement with the EU – they will be “extremely difficult negotiations”, warned EU Parliamentarian Danuta Huebner - a challenge that could drag on for years and that will define the new Government’s term. Theresa May’s plan of a hard, clean divorce with the EU seems fatally wounded, and the chances of a softer Brexit have increased after the British people rejected May’s programme at the polling stations. What are the practical alternatives? There aren’t any – except to stay in the EU– wrote Graham Bishop, voicing the renewed calls for a second referendum. [...]
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