The EU banking industry is still recovering from the financial crisis with ongoing restructuring work and the UK leaving the EU comes at a challenging time for the sector.
This means that the potential upheavals that could result from Brexit include more challenges for the whole of the banking industry as well as its stakeholders.
Brexit is expected to result in a significant disruption as banks, clients, market infrastructure and regulators simultaneously carry out their plans to prepare for the UK’s departure from the EU.
And Brexit transformation programmes are likely to be broad, with myriad activities needing to be delivered. These include restructuring legal entities; designing new ways of operating and transacting; gaining regulatory approvals; connecting to new market infrastructure providers - such as exchanges and central clearing facilities who themselves may be undergoing a similar transformation process - moving staff into new premises; and drawing up new contractual arrangements with suppliers.
Working with the PwC team, this was the first industry piece of work to emerge post Brexit that laid out the key operational challenges for banks in a structured format. It was instrumental in providing the evidence based material for many of the subsequent discussions, for both industry and supervisors, in the debate on transition periods and impact assessments. The PwC team were diligent and knowledgeable, pulling on both their own knowledge as well as extensive interviews with different institutions.
With the political environment in a state of flux, and the regulators continuing to develop their thinking about post-Brexit financial markets in the UK and the EU, banks have had to carefully consider their course of action in response to Brexit.
We were commissioned by the Association for Financial Markets in Europe (AFME) to produce a report which outlined the operational impacts and transformation challenges that Brexit presents for the provision of banking services in the EU.
Planning for Brexit – Operational impacts on wholesale banking and capital markets in Europe provides policymakers and other industry stakeholders, both in the EU27 and the UK, with a fact-based analysis of how these challenges are likely to affect the financial services industry.
We interviewed senior executives and gathered information on Brexit plans from 15 banks including those EU27 headquartered, UK headquartered and non-EU headquartered, and spanning a range of sizes, activities, origins and legal entity structures. We also drew on our existing experience of previous transformation case studies for major banks.
Our report helped to break down the task of responding to Brexit into 25 steps and made clear - for banks and regulators alike - the scale of the complexity of decisions and actions firms will need to take to successfully service their customer base across the UK and EU27.
Our study with AFME gave us a unique profile in the market and opened up conversations with regulatory bodies and government departments in the UK and Europe. We helped them to understand the intricate challenges that the banking industry will face as a result of changing regulation, and to see the issues from the perspective of the banks themselves.
We also unified our guidance to clients across the EU and other third country banks - such as US investment banks - and we’ve spoken to most of the major international financial services groups operating in the UK and Europe.