Banks will struggle to adapt by Brexit deadline - claim

The Association for Financial Markets in Europe (AFME), which represents wholesale banking interests and lobbies on the behalf of members including Goldman Sachs, Morgan Stanley and Barclays, said that services will be at risk without some sort of transitional agreement.

“Europe’s key economic sectors currently have little clarity on the scale, scope and timescale of the eventual Brexit deal.

The process is likely to be particularly challenging in wholesale banking, given the high concentration of Europe’s market capacity in the UK and the high share of cross-border business currently conducted from a UK base,” the AFME paper said.

It cited a study conducted for the lobby group by PwC which suggests that “a further three years will be required to adapt” following the completion of the two-year negotiation period, adding that it will be “vital” to give an early indication of whether a transitional arrangement can be struck as part of exit negotiation.

The lobby group is pushing for a two-phase process which includes a short-term “bridging period” that will run until a new trade deal is struck between the UK and EU, followed by an “adaptation period” that would allow for “phased adjustment” to the new trade deal.

The report’s recommendations work under the assumption of a hard Brexit, after Theresa May confirmed that the UK will give up access to the single market.

The move will effectively revoke passporting rights that allow financial services to conduct business across the block without applying for separate licenses.

AFME chief executive Simon Lewis said: “Financial stability and market efficiency must be safeguarded during the Brexit implementation process and thereafter.”