EU is assessing how much access it will grant Britain’s huge financial sector from January.
The following are details on how different areas of finance will be affected.
Foreign banks will not be permitted to directly offer loans or deposits to customers in the EU and must have a branch or subsidiary in the bloc.
Banks in the UK and EU are anticipating if they will have to hold capital against exposures to sovereign debt from each other’s jurisdictions from January, which would have major implications on the location of their operations.
The London Stock Exchange clears over 90% of euro denominated interest rate swaps and the EU has said it will grant temporary permission for this to continue from January.
It is still uncertain if EU investors can trade interest rate and credit default swaps in London from January or if they must use a platform in the bloc.
EU and UK regulators have agreed on supervisory cooperation that will allow asset managers in Britain to continue running portfolios of funds based in the bloc, known as delegation.
CREDIT RATING AGENCIES
Moody’s, S&P and Fitch will be allowed to continue using London-based analysts to rate EU companies and their issuance, but the bulk of EU ratings will be done in future by analysts based in the bloc where the Big Three have operations already.
Brussels has said that in the short to medium term, it will not allow banks and brokers in London to undertake securities transactions like bloc and derivatives trades for fund managers and other institutional customers in the EU, putting pressure on banks to move more staff to the EU.
London-based cross-border trading platforms Aquis, Turquoise and Cboe are waiting to see if Brussels will allow them to continue trading EU listed shares from January. Otherwise, all three will use new hubs in the bloc for trading EU company shares, splitting markets.
Trading in euro-denominated corporate and sovereign bonds has already moved from London to operations in the euro zone. Clearing of euro-denominated bond trades has also moved from London to Paris.
Direct access for insurers and reinsurers from Britain is only possible for certain areas like reinsurance contracts, prompting insurers to open hubs in the EU. The Lloyd’s of London insurance market has set up a new unit in Brussels. Many domestic UK insurers don’t want access to the EU so that Britain can amend rules inherited from the EU.
Reported by Huw Jones