The Financial Conduct Authority (FCA) warned Thursday (March 21) that a no-deal Brexit poses risks to the financial sector and the customers these firms serve, a news outlet has reported.
According to a report in the Financial Times, citing the FCA, the U.K. regulatory watchdog said that while worst-case contingency plans have been put in place during the last 24 months, there is still a big risk because there has been no legal agreement to remove that risk. The FCA urged banks and financial firms to take steps during the next week to prepare in case the U.K. exits the European Union next Friday (March 29) without a deal.
The FCA is most concerned with how the contracts that underpin financial products will perform and how trading shares will work if there is a no-deal Brexit, noted the news outlet. According to the report, a lot of firms have not sent the necessary paperwork for the new businesses that will no longer have the right to sell products and services across the bloc to continue to trade. The Financial Times noted that it reported in February that only 10 percent of the large investment firms’ clients filed the proper paperwork.
“We cannot rule out some volatility and disruption, particularly in a ‘no deal’ exit where risks remain — primarily related to the operational challenges associated with relocating businesses, or repapering clients in a short timescale, and due to reliance on a patchwork of solutions in the EU,” said Nausicaa Delfas, the FCA’s executive director of international, in a speech covered by the paper.
Even though the exit is a few days away, and with the U.K. Parliament voting down a no-deal exit, there is no agreed-upon way to remove the risk. U.K. Prime Minister Theresa May will be in Brussels this week to request a three-month extension, which would put off the Brexit deadline to the end of June.