You are here

Bank of England sets out Brexit contingency planning issues

06122583.jpg
The chief executive of the Bank of England's Prudential Regulation Authority said 147 banks and investment firms have given details on their plans for the eventuality the UK could leave the European Union in March 2019 without an exit agreement.

[LONDON] The chief executive of the Bank of England's Prudential Regulation Authority said 147 banks and investment firms have given details on their plans for the eventuality the UK could leave the European Union in March 2019 without an exit agreement.

Sam Woods released the figures in reply to a July 24 letter from Nicky Morgan MP, new chair of the Treasury Select Committee, asking for an update on his progress in monitoring banks' Brexit preparations.

He said the PRA was analysing the responses to see if any issues or concerns might lead to a risk from the "collective execution of the contingency plans". He expected the bank's financial policy and prudential regulation committees would reach conclusions in autumn.

However, he identified four main risks that could arise.

sentifi.com

Market voices on:

"Fragmentation of market-based finance could result in higher costs resulting in less activity, particularly in relation to the hedging of risk, which could result in risks to both the EU and the UK," Mr Woods said.

He also raised concerns over "the continued servicing and performance of existing contracts and restrictions on data transfers", asking if such contracts could continue untrammelled post-Brexit.

Mr Woods said the required restructuring by firms to mitigate Brexit business risks might increase their complexity and possibly make them harder to supervise and resolve.

The PRA itself might also face "a material extra burden on resources" by having to authorise and then supervise a significant number of additional firms.

"We may have to make some difficult prioritisation decisions in order to accommodate it," he said.

He concluded that "some form of implementation period is desirable, in order to give UK and EU firms more time to make the necessary changes to the UK's new relationship with the EU in an orderly way".

Ms Morgan acknowledged Woods' reply. "The potential extra burden on the PRA's resources, and the risk that may pose to its objectives, is an issue that I'm sure the committee will want to monitor," she said.

Ms Morgan took up her position on the parliamentary committee on July 12 after the UK general election. Other members of the committee have yet to be appointed.

REUTERS

Powered by GET.comGetCom