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What happens to banks if there’s a no-deal #Brexit?

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There was a big hoo-haa last week when UK Gov released their analysis of a no-deal Brexit. A no-deal Brexit is if we reach 29th March 2019, two years after triggering the exit process and an effective D-Day, without agreeing terms between UK Gov and the European Union. The research released was in the form of 28 white papers, looking at the impact of a no-deal on travel, tax, law, driving and more.

I’m sure you’re all bored by the whole thing by now, but there was one specific paper released that may grab your attention, as readers of The Finanser. That paper focused upon the impact upon banking and financial services.

The gist of the paper says that the government will put in place a Temporary Permissions Regime (TPR) to maintain the status quo. That will mean, for UK customers and businesses, they can continue to use EU banks just as they do today for a period of three years. However, there is a section that             clearly shows where maintaining the status quo will be difficult:

In the absence of action from the EU, EEA-based customers of UK firms currently passporting into the EEA, including UK citizens living in the EEA, may lose the ability to access existing lending and deposit services, insurance contracts (such as a life insurance contracts and annuities) due to UK firms losing their rights to passport into the EEA, affecting the ability of their EEA customers to continue accessing their services. This could impact these firms’ ability to continue to service their existing products.

For example, the UK is a major centre for investment banking in Europe, with UK investment banks providing investment services and funding through capital markets to business clients across the EU. In the absence of EU action, EEA clients will no longer be able to use the services of UK-based investment banks, and UK-based investment banks may be unable to service existing cross-border contracts.

The government has committed to putting in place unilateral action, if necessary, to resolve these issues as far as possible on the UK side. For example, the government has committed to continue to treat prospectuses that are valid in the UK before exit (including those approved by a competent authority in a different EU member state) as valid for the remainder of the 12 months from their date of approval, including where that includes a period after the UK exits the EU.

However, the UK authorities are not able through unilateral action to fully address risks to the EEA customers of UK firms currently providing services into the EEA using the financial services passport. The government is committed to working with EU partners to identify and address such risks.

In other words, the UK will implement laws and structures to ensure that everything stays the same after March 29 2019, even if there’s a no-deal. However, the UK can do that for EEA financial firms and their customers operating in the UK, but they cannot do anything about UK firms and customers dealing in Europe or vice versa.

Oh what fun this process is proving to be.

Cartoon by Myra O'Connor

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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