Today marks the deadline for banks and other financial services firms to inform the Bank of England of their plans for a so-called hard Brexit.
Prudential Regulation Authority (PRA) boss Sam Woods wrote to firms undertaking cross-border activities between the UK and EU requesting the information in April.
He noted at the time that the level of planning was “uneven across firms and plans may not be being sufficiently tested against the most adverse potential outcomes”.
Writing to relevant banks, insurers and investment firms, he requested written confirmation that bosses were considering contingency plans, a summary of those plans and an assurance that they consider a “wide range of scenarios” from Brexit.
He said in the letter: “We would welcome full responses by Friday 14 July 2017.”
But longer term?
Speaking in Paris earlier this week, JP Morgan chief executive Jamie Dimon suggested that there is too much focus on how many jobs could be shifted from London in the short-term as a result of Brexit. His bank, for instance, is planning to move “hundreds” of staff to the EU before the formal date of Brexit on 29 March 2019. But he warned that the EU could “dictate” the firm shifts thousands more jobs in the longer term.
Experts commenting on today’s Bank of England deadline also pointed to the longer term risks.
Accenture managing director Peter Beardshaw said: “While banks are currently focused around the immediate, primary, impact of Brexit on their day-to-day operations, such as their physical locations, employee footprint and the need to restructure themselves as legal entities – it’s important for banks to take stock of the secondary ripple effect.
“Banks will need to assess the impact on their customers and the challenges, but also opportunities, this might provide. This will include significant changes to market infrastructure, as well as new tariffs on businesses of all sizes.”
Haydn Lightfoot, of Synechron Business Consulting, said:
If European regulators require further banking functions to be performed within the EU by banks operating in the region, this could push a soft Brexit relocation strategy into a hard Brexit scenario regardless of what happens in UK parliament.
As such, UK-based financial institutions working on their Brexit relocation scenarios may also want to consider a post March 2019 (phase two) Brexit relocation plan to reflect future scenarios based on the relative risks of specific banking functions being required to move within EU boundaries to maintain access to EU clients.
Whilst banks may want to limit Brexit re-location costs to a minimum, these risks could well influence location decisions for future growth.