Nothing new on Brexit, right?

European Commission Published 03.11.2020

Good news – there may be a deal in sight on Brexit again insofar as Brexit talks resumed in London and are now scheduled to last until mid-November. In the meantime, several businesses have been preparing for a no-deal scenario, but different sectors will experience distinct levels of disruption.

For the financial services sector, unfortunately, the disruptive impact will nevertheless still be quite high, especially considering that the financial services sector is not part of the trade discussions, so in many ways 1 January 2021 will put the industry in a no-deal situation regardless of whether Brussels and London strike a trade agreement.

Main impacts to be felt by financial services industry

  • UK clearing houses have been allowed to work with EU customers until 2022
  • Contracts dependent on EU membership are redrafted or moved by the firms under a newly licensed subsidiary in the single market
  • “Passporting” for the banking sector will end, with an impact for EU residents who use British banks
  • Personal data transfers, essential for the conduct of finance operations, will become illegal without mutual adequacy assessments, which have yet to be made to date.
  • “Equivalence” rulings, while they generally don’t grant market access on their own, allow a lighter regulatory regime for areas ranging from auditing to insurance to financial conglomerates.

Mitigating factors in a deal-scenario

A free-trade deal will have an indirect positive impact on financial services because it would set the mood to solve the other issues — e.g. as data flows, share and derivative trading, and investment banking equivalence findings — constructively.

Considerations for a deal-scenario

Without a trade deal, it is likely that negotiations end in acrimony and neither side would be inclined to keep negotiation administrative pacts regarding financial services.

Specific developments and recent financial services sector updates


  • The European Commission does not wish, at this stage, to amend the EU market rules to solve the issue of dual-listed shares
  • EU governments have a different view and would prefer to legislate now to prevent friction over future access to London’s share trading


  • The UK FCA has stated it wants investor protection to be a “prime concern of its post-Brexit regulatory regime”. Its current revision of liquidity and risk management requirements for funds reveals a potential distancing from UCITS legislation.
  • The new rules are expected to apply to all investment companies regulated by MiFID.

Source: Politico

By Gilles Walers


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