Financial institutions must prepare now for a no-deal Brexit, says the European Banking Authority (EBA). The authority's chairperson, Andrea Enria, said that “firms cannot take for granted that they continue to operate as at present nor can they rely on as yet unrealised political agreements or public policy interventions.” In its announcement yesterday, the EBA said that competent authorities should ensure that financial institutions take practical steps now to prepare for the possibility of a withdrawal of the UK from the EU in March 2019 with no ratified Withdrawal Agreement in place, and no transition period.
It added: “While the political agreement on a transition period is welcome, it will not be given legal effect until there is a ratified Withdrawal Agreement in place. This is not guaranteed, and in any event, it will only come at the end of the Article 50 process.”
Enria also added “Risks, capacity and legal implications must be examined and addressed.” The EBA carried out an assessment of what financial institutions need to do before March 2019 and suggests the following actions:
- take adequate steps to mitigate the impact of a no-deal Brexit without relying on possible public sector solutions that may not be proposed and/or agreed in time;
- ensure the correct regulatory permissions are in place, and that there is associated management capacity in place ahead of time;
- identify risks around access to financial market infrastructures and funding markets and mitigate those;
- assess and take necessary actions to address any impacts on rights and obligations of their existing contracts, in particular derivative contracts;
- communicate clearly to their customers where the latter might be impacted by the departure of the UK without a ratified Withdrawal Agreement;
- inform their competent authorities about the actions they are taking, including with respect to communication with their customers.
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