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2020-05-doc3 Brexit and the financial industry

Brexit has been overshadowed by the COVID-19 monster, but it is still a reality. In the book ‘Brexit and financial regulation’ a practical guidance is provided on the complexities of Brexit as it applies to financial institutions. It presents a detailed account of the myriad of laws, regulations and institutional opinions, such as those from the European Banking Authority and the European Securities and Markets Authority. The analysis also includes a review of the approaches taken by EU jurisdictions such as Germany, France, the Netherlands and Ireland. EU legislation including European Markets Infrastructure Regulation, revised Markets in Financial Instruments Directive, Capital Requirements Directive IV and Bank Recovery and Resolution Directive are covered too. It is a practical book, dealing with the key issues. Abundent literature is not considered.

I thumbed through it. After an introduction by the editors, and an explanation of the famous Withdrawal agreement and the political declaration on the future EU / UK relationship (including its dispute resolution provisions), a worthwile chapter is devoted to International standards (Michael Raffan) providing an excellent overview of some 10 international regulatory bodies and their work assessing their future impact on the UK. From the FSB 15 global financial standards are mentioned, including the Key Attributes, which are of importance especially for resolution purposes. The Bank of England 2017 approach is not expected to change significanly post-Brexit. The chapter on an EU equivalence regime (Arun Srivastava, Nina Moffatt) considers the notion that UK laws and regulations in the financial services will be fully aligned with EU laws. The authors consider in quite some detail this process, the criteria for assessing equivalence and its implementation.

UK-authorised financial services firms wishing post-Brexit to continue or to establish operations in the EU would be interested to read the chapter on the EU approach to authorisation (Daniel Carall-Green) (branches in the EU from UK firms will be subject to the BRRD) and the same approach to authorisation in Germany, France, the Netherlands, and Ireland (Michael Born, Roberto Cristofolini, Floortje Nagelkerke, Donnacha O’Connor). It seems a rather burdensome venue, to the continent that is trying to build something, called Capital Markets Union (CMU), out of the national syrup. Since 2016 the impending Brexit was the reason to propose such a capital union at European level. A European capital market will however be fairly small and the rules of corporate or insolvency law are still too different to be attractive to investors. The London financial center is still large in terms of bond and equity issuances or derivatives trading. Branches in Frankfurt, Paris and Amsterdam continue to support this position somewhat. If the continental way works, the continent seems to stay an attractive market for UK firms. Recital 8 to the Restructuring Directive (2019/1023) reads: ‘The differences among Member States in procedures concerning restructuring, insolvency and discharge of debt lead to uneven conditions for access to credit and to uneven recovery rates in the Member States. A higher degree of harmonisation in the field of restructuring, insolvency, discharge of debt and disqualifications is thus indispensable for a well-functioning internal market in general and for a working Capital Markets Union in particular, as well as for the resilience of European economies, including for the preservation and creation of jobs.’ The Directive is just a small step. The pace taken should not, in any way, frighten British firms.

Personally I also found interesting to read the impact on the UK senior managers, certification and conduct regime (Charlotte Henry) and the update of the regime of the BRRD (Jan Putnis, Chris Hurn), righly noting that without a solid recognition system any cross-border resolution action is very troublesome. Also the transitional law system is incomplete and uncertain. In any scenario, including no-deal Brexit, firms will be wise to continue to prepare for plans to minimise disruption and to re-assess transparency requirements and transaction reporting procedures (with a shift form ESMA to FCA). In all, the book is a welcome guide to understand the work many still have to do before ultimo December 2020, many working from home.

Jonathan Herbst and Simon Loegrove (eds.), Brexit and Financial Regulation, Oxford University Press 2020; ISBN 978 0 19 884079 4

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Note: this book I received free of charge from the publisher with the request to announce it or to review it on my blog at