EBA published an opinion on the risks posed by lack of preparation by financial institutions for the departure of UK from EU. EBA asked the competent authorities to ensure that financial institutions take practical steps now to prepare for the possibility of Brexit with no ratified Withdrawal Agreement and no transition period.
The monitoring of firms' contingency planning conducted by supervisory and resolution authorities shows that financial institutions need to hasten their preparations for the potential departure of the UK from the EU in March 2019 without a ratified Withdrawal Agreement in place. While the political agreement on a transition period is welcome, it will not be given legal effect until a ratified Withdrawal Agreement is in place. Based on the assessment of EBA, financial institutions should take adequate steps to mitigate the impact without relying on possible public-sector solutions that may not be proposed and/or agreed in time. Financial institutions should:
- Ensure they have the correct regulatory permissions and the associated management capacity in place ahead of time
- Identify risks around access to financial market infrastructures and funding markets and mitigate those risks
- Assess and take necessary actions to address the impact on rights and obligations of their existing contracts, in particular derivative contracts
- Communicate clearly to their customers where the customers might be impacted by the departure of the UK without a ratified Withdrawal Agreement
- Inform their competent authorities about the actions they are taking, including with respect to communication with their customers
Keywords: Europe, EU, Banking, Brexit, Opinion, Withdrawal Agreement, Transition Period, EBA
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