EU regulators tell financial firms to prepare for Brexit

London, April 13: European Union regulators are on the mode to get a bit financially stronger as they have urged banks, investors, and customers on Thursday to take “timely action” to avoid disruption to cross-border derivatives and insurance contracts caused by Brexit.

Britain leaves the EU in March 2019 and a “standstill” transition deal until the end of 2020 agreed last month won’t be formally ratified until October or later.

“Contingency planning should consider timely responses to all potential challenges, such as contract continuity and possible relocations,” said a joint report from the EU’s banking, insurance and markets regulators on risks to the financial system.

In the short term, Brexit may affect the access of EU households and companies to financial services provided in Britain and may affect market confidence, it added.

British regulators have said that last month’s transition deal means that EU banks with branches in London don’t have to rush to apply for new UK licenses by March next year.

The BoE wants EU regulators to reciprocate regarding British lenders with customers in the EU, to avoid hasty relocations that could damage the City.

Thursday’s report said banks, insurers, asset managers, and market infrastructure firms in Britain should instead press ahead with applying for licenses before next March to avoid their customers being cut off from services like clearing.

“By the time legal certainty on a potential transition period may be attained, financial institutions would not have sufficient time to take necessary measures,” the report said.

Relatively few firms have begun relocating staff and operations to the EU, but “increased relocation activity” can be expected nearer to next March, it said.