The UK government must provide more clarity – and quickly – on a Brexit transition arrangement, the Association for Financial Markets in Europe (Afme) has claimed.
The trade body today published a report warning that banks could face a “cliff-edge” situation, if the UK were to leave the EU without a settled agreement for a new relationship.
A clearly defined transitional period, which would maintain existing market arrangements while a more permanent position is negotiated, would help businesses to retain access to capital market funding, banks obtain local authorisations, and regulators adapt to new arrangements.
“Banks are conducting extensive planning and putting in place arrangements to minimise disruption to their businesses and clients,” said Afme chief executive Simon Lewis.
“However, additional time is required to adapt to the post-Brexit framework and to minimise disruption for end users of financial services, including ensuring the continuity of existing contracts.”
Afme's call comes amid continued complaints from City bodies that the government has still not published its much-awaited financial services paper.
“Financial and professional services in the UK account for 2.2m jobs and £71.4bn in tax revenues each year. This integral sector of the UK economy is struggling with the uncertainty caused by Brexit, but we remain in limbo on a financial services position paper,” said the City of London Corporation's policy chairman Catherine McGuinness.
“City businesses want clarity on our future trading relationship with Europe, our post-Brexit immigration policy and more information on what a transitional arrangement will look like.”
Afme has advocated a transitional arrangement which includes a “bridging period” and an “adaptation period”.
The bridging period will maintain the UK and EU's existing relationship until a new agreement is ratified, should that prove unachievable within the two-year period from the signing of Article 50.
The adaptation period would follow, and would enable phased adjustment to the new trade relationship.
Without this, Afme warns EU banks could find themselves in breach of regulations for maintaining positions in UK clearing houses.
UK and EU parties may no longer be able to rely on existing cross-border contracts, and leaving the EU “safe zone” will make it harder to transfer data between the two areas.