The personal finances of tens of millions of people are at risk because of the failure to secure cross-border contracts after Brexit, a new report has warned.
Some 36m people, and the financial stability of the UK and EEA region, are facing a "looming crisis" if the UK and EU fail to agree a solution in the next few months. Pensions, insurance policies and business contracts are affected, as well as up to £26 trillion of outstanding uncleared derivatives contracts.
Although firms are acting urgently, a paper published by TheCityUK claims that without regulatory support it is "highly unlikely" this will be adequate to fully address the problem in the time that remains.
The paper calls on both the EU and UK, across the public and the private sectors, to pull their sleeves up to ensure the affected cross-border contracts are grandfathered, either for a time-limited period, or potentially until maturity.
This would protect UK and EEA policyholders and institutions and avert potential widespread financial losses.
The paper notes that some cases will require special regulatory intervention - which brings additional warnings around regulatory capacity - while others will require new entities to be set up and capitalised, a process which cannot always be completed in the time available.
It argues there are three ways contracts could be grandfathered: through a bilateral agreement between the UK and EU, supported by regulatory co-operation; by separate regulatory action or legislation in each jurisdiction, consistent with the approach agreed between the UK and EU; or via inclusion in the inal EU Withdrawal Agreement.
TheCityUK chief executive Miles Celic said: “This sounds like an obscure issue, but ignoring the question of contract continuity post-Brexit is to play a dangerous game of chicken with the finances of customers across the whole of Europe. Without a viable solution, millions of people could be left without a safety net. This must not be sucked into the Brexit negotiations. It is a non-political, technical issue and needs a non-political, technical solution.
“Continuing to be able to serve customers and clients is the industry’s number one priority. While firms are doing everything they can, this is not a problem that businesses can fix alone and requires a coordinated UK/EU approach.
"Without it, people and businesses across Europe could be left dangling over a cliff edge following Brexit.”