In the summer of 2016, Allen & Overy published an extensive paper evaluating the expected impact of the Brexit decision on financial services regulation. The paper was among the first in a now on-going series of publications around the effects of Brexit, and addressed the question: “What impact will Brexit have on regulated firms established in the UK, Europe, and third country jurisdictions?” In a more recent publication in the series, leading EU legal experts return to review the topic in light of the now official triggering of the UK;s Article 50, and ahead of what is predicted will be a long road of negotiations to come.

Leading European legal practice Allen & Overy regularly publishes papers to share its knowledge and expertise on various regulatory matters relevant to its client base. One area that is of particular interest to more or less every business entity in Europe, and especially to Allen & Overy and its clientele, is the United Kingdom’s July 2016 referendum decision to part ways with the European Union. Last year, immediately following the now infamous ‘yes’ vote by the Britons, Allen & Overy published the first paper in a now on-going series called Brexit Law: Your Business, the EU, and the Way Ahead.

The first publication in the Brexit Law Series by Allen & Overy – Financial Services Regulation: What Impact Will Brexit Have on Regulated Firms Established in the UK, Europe, and Third Country Jurisdictions? – presents an introductory overview and analysis on the topic and addresses some of the most critical areas of concern for UK and European firms.

More recently, another publication postulates on the road ahead for Brexit negotiations, specifically offering an update that follows up a number of new publications in March by EU and UK regulatory bodies which revealed several broad indications from both around the forthcoming negotiations.

Brexit law – your business, the EU, and the way ahead

Within the EU, the UK contains the largest financial centre, and the international financial market that calls London home is unique within the EU, attracting a broad range of global banking giants and financial services providers. Although many foreign institutions have established UK locations in order to participate in the UK financial market, a substantial number of non-EU financial institutions also use the UK as a hub to access clients and markets all across the EU.

Likewise, many EU firms maintain branch presences in London. Brexit, in whatever form it may take, will impact the financial services industry. The extent of this impact will largely depend on the outcome of the negotiations that are expected to begin soon, not to mention the extent to which these negotiations end up preserving access for UK firms to EU clients.

In the eighteen years since its establishment, EU initiatives aimed at ensuring the integration of European financial markets, have led to to, among many other things, the development of a ‘single rulebook’ made up of a lengthy and complex body of primary laws (predominantly directives), delegated laws (including regulations and technical standards), and guidance of common rules for European banking, investment and insurance sectors.

The EU directives that have now been in place for nearly 20 years create a single market by enabling financial services firms that are authorised in one member state (the home state) to carry out business activities in another member state (a host state) without the need for a separate host state authorisation either through the establishment of a local branch, or on a cross-border basis.

Other recent initiatives have also aimed to better coordinate financial services by implementing the work of organisations such as the Financial Stability Board (FSB), and the Basel Committee on Banking Supervision (BCBS). According to Allen & Overy, any analysis of Brexit’s impact must consider the ramifications of both global initiatives, as well as future arrangements and interactions between the United Kingdom and the European Union.

Analysis

In its June 2016 publication, Allen & Overy presents its analysis on the impact of Brexit to the financial services regulatory landscape. The publication presents relevant insight for a wide audience in both the UK and the EU, and especially for professionals in the European banking, investment and insurance sectors. By posing several central questions and subsequently answering these in depth, the paper manages to address key areas of importance to the topic. The questions covered in this analysis are briefly outlined below for reference:

• Will current legislation and regulation need to be amended?
• What are the likely implications for cross border activity?
• Will Brexit impact the UK’s ability to influence financial services regulation?
• How will the impact of Brexit interact with global initiatives?

What the UK’s vote to leave the EU might mean for you

Although the complete impact of Brexit will only be known once an exit model has been negotiated by the UK, there are several key important areas to be considered by banks and other financial services providers, as reported by Allen & Overy, namely: banking and investment services, derivatives, funds, market infrastructure, and insurance.

Brexit negotiations near

In the final week of March this year, the UK’s Article 50 Notice was served, and both the UK and the EU 27 announced broad indications i.e. their approaches to forthcoming negotiations. Indeed it was a busy week on the road toward Brexit - the UK Government also published a white paper outlining its proposed Great Repeal Bill. The aforementioned indications by the EU 27 and the UK as to how they plan to approach negotiations, came by way of publication of three different documents, namely: the UK’s Article 50 notice, a draft of the European Parliament’s motion for a resolution on the negotiations, and a draft of the European Council’s negotiation guidelines. Although there is still a long way to go before the full impact of Brexit is to be revealed, the publication of these documents last month helped to offer a bit more clarity about the road that lies ahead.

In a paper published this past month, Allen & Overy explains how these documents shed light on the way the negotiations are likely to progress, and about how the UK government plans to manage the highly consequential task it is faced with. This more recent publication forecasts the challenges along the way, underscoring the key implications for commercial parties.

• , To read or download the full paper - Financial Services Regulation: What Impact will Brexit Have on Regulated Firms Established in the UK, Europe, and Third Country Jurisdictions? - click here

• , To read or download the full paper - A Busy Week on the Road to Brexit - click here.