This articles tackles one of the biggest dilemmas in financial services - how do EU and UK banks continue to do business as usual after Brexit?
‘Passporting’ has been the hottest topic in financial services since the referendum. It sums up the dilemma on either side of the Channel: how do EU, UK and third country banks continue to do business as usual in the UK and across Europe once the UK has left the EU?
Right now, around 8,000 organisations passport into the UK to secure their presence here. Another 5,500 City firms do the same into the EU itself. Come March 2019 all that will change. All banks - many with little experience of the UK regulator - will need a licenced branch or subsidiary to operate in the UK, while the UK itself will have third country status.
As uncertainty continues to swirl around the Brexit negotiations, many banks still have countless unanswered questions. And yet the clock is ticking fast: it usually takes 18 months to gain a licence and more than two years to set up a subsidiary.
With just 130 European banks so far applying for a full licence to do business here after Brexit, firms clearly want some direction before making vital decisions for their future. Encouragingly, the regulators have been calling for a transition period to ease the City’s passage to Brexit, as was also outlined in Prime Minister Theresa May’s Florence speech. The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) are also considering various solutions for the wave of firms seeking authorisation, with temporary licences suggested as a potential solution.
While the authorities and the Government decide on the best way forward, there’s plenty banks themselves can already be doing now. That includes vital no regrets decisions to ensure your business is not just Brexit-ready, but match-fit for the opportunities ahead.
These steps will not only help safeguard your business, they will provide key insight to aid the licence application process, for which you will also need to set out the UK branch specific governance framework and the KPIs driving your business after Brexit.
And remember while the regulators’ hands may be tied until they themselves have more direction, they may be able to help you understand your options and are already starting to reach out to branches to discuss next steps.
With the UK’s largest bank authorisations and licencing practice and an extensive network of specialists across Europe, KPMG has direct access to the policy and decision makers that are reshaping Britain. To see how we can help your organisation transform for the future, please get in touch.