On Friday, two banking lobby groups said that the European Union and Britain need an agreement to enable cross-border financial contracts to run beyond Brexit and avoid disrupting markets.
UK Finance and the Association for Financial Markets in Europe (AFME) said in a joint paper that the legal status of cross-border contracts written by financial firms based in the United Kingdom is not clear once they no longer come under rules of the European Union starting March 2019.
“It is estimated that 1.3 trillion euros ($1.57 trillion) of UK-based bank assets are related to the cross-border provision of financial products and services – many of which support EU exporting businesses that are key drivers of growth,” Simon Lewis, Chief Executive of the AFME stated.
“Early action to clarify that these contracts will continue following Brexit is therefore critical.”
The paper said that the action could include legally-binding “grandfathering”, or allowing existing contracts to run to maturity without change.
In the past, the authorities have taken similar steps when they agreed “continuity” measures to introduce the euro and new European Union rules on derivatives, it added. Taking no action would imply huge costs to transfer contracts to other entities or to restructure businesses.
The Bank of England is already studying what can be done to lessen the impact of Brexit on cross-border insurance contracts.