The AFME, which represents Europe's wholesale financial markets, has made recommendations to the European legislator to ensure legal certainty and financial stability on the wholesale banking markets throughout the process of the withdrawal of the United Kingdom, Europe's largest financial market, from the European Union.
“To avoid disruption to services, existing legislation should continue to be effective during a transitional period on all firms and situations”, AFME states in a report it drafted in February with the consultancy firm PwC.
This report calls for a three-year period on top of the two years provided for by the Treaty for the Brexit negotiations, to allow financial players to adapt to the new European financial environment. It “will be vital to give an early indication that a transitional arrangement will be agreed upon as part of the exit negotiations”, the report stresses. The transitional agreement could comprise: - a “bridging period” to avoid short-term disruption until the new trade relationship between the United Kingdom and the EU is ratified, should that exceed the initial two-year period; - a subsequent “adaptation period”, enabling phased adjustment to the new trade relationship.
According to AFME, the prospect of Brexit includes a clear position of the supervisors on how: - banks will be authorised to operate across borders; - regulations and equivalence provisions will be applied between the legislation of third countries and EU law; - consistent approaches will ensure continuity of existing contracts.
Additionally, the existing rules that provide for EU-wide decisions, for instance through the European supervisory authorities (ESMA, EMA, EIOPA), will need to be replaced. There should also be “automatic legal recognition” of resolution decisions regarding failing banks made at EU and UK level.
The report is available here: http://bit.ly/2o1LqLE. (Original version in French by Mathieu Bion)