On June 25, the European Banking Authority (EBA) published an opinion on preparations for the withdrawal of the United Kingdom from the European Union (Brexit). Its opinion cites two aims with respect to national competent authorities:
- ensuring that financial institutions are adequately considering the risks of a possible Brexit without a ratified withdrawal agreement, and that they are putting in place appropriate plans to mitigate risks in an appropriate timeframe; and
- drawing attention to the customer protection obligations of financial institutions in these circumstances.
The EBA identifies the following as factors that influenced its decision to issue the opinion at this time:
- inadequate progress in financial institutions’ preparations for a “no deal” Brexit;
- the absence of any legal certainty around the politically agreed transition period;
- a material possibility, despite best efforts from both sides to conclude a ratified withdrawal agreement, that the United Kingdom may leave the European Union on March 30, 2019, without a transition period; and
- the necessary mitigating actions that take time and that should be pursued without delay.
The opinion states that where Brexit contingency planning is taking place, firms are delaying its implementation and continuing to await political solutions. The EBA emphasizes that firms should act now and “financial stability should not be put at risk because financial institutions are trying to avoid costs.”
The Bank of England’s governor, Mark Carney, has criticized the EBA’s opinion as “incomplete” since it fails to acknowledge the temporary permissions regime proposed by the UK government.
The EBA’s opinion is available here.