Financial watchdog expects firms to make Brexit moves after year-end

EU officials have warned that London will lose its EU agencies post-Brexit. [bdrone/Shutterstock]

Financial firms are waiting until the end of the year before moving staff and business ahead of Britain’s departure from the European Union in 2019, the country’s markets watchdog said.

Banks, asset managers and insurers have been told to have contingency plans in place showing how they would cope with any abrupt severing in business ties with customers in the EU.

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While some firms have said privately they are reaching a point of no return and need to move some operations to be ready, Andrew Bailey, chief executive of the Financial Conduct Authority, said that the situation differed from firm to firm, and he saw no imminent implementation of contingency plans.

“By end of the year firms believe that they are in a position they have to implement (their plans),” Bailey told reporters on Tuesday.

Agreement on a transition period between leaving the EU and the start of new trading terms would “break” that time pressure, Bailey said.

No transition deal has been agreed, but firms were not talking about actually moving operations yet.

“The point at which they think in terms of real business being done and staff moving, they talk more in terms of getting there,” Bailey said.

The EU’s banking, securities and insurance watchdogs have published guidance for issuing new licences for British-based firms wanting to open new subsidiaries, with the aim of stopping unfair competition between national regulators.

Last week the bloc’s securities watchdog ESMA published more detailed guidance for asset managers in Britain who want to continue doing business from inside the EU, saying there must be no “letterbox” companies, meaning a presence of substance is required.

This has raised fears in the industry that it will curb long-standing “delegation”, where asset managers based in Britain manage several funds listed elsewhere in the EU.

Bailey said he disagreed with parts of the guidance from ESMA, on which he sits, saying delegation should be allowed to continue after Brexit.

“This is a model that works effectively. We know how to regulate it in the public interest. There is no need for it to change,” Bailey said.

“I would put the question back to my ESMA colleagues, ‘Why do you think Brexit requires these changes to be made?’,” he said.

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