New study reveals that millions could be at financial risk because of Brexit contract issues

Contract continuity could be significantly affected by the UK’s departure from the EU, according to new research conducted by TheCityUK.
The financial services industry body has said a significant level of risk could arise from questions around what will happen to millions of cross-border contracts.
This includes the 36 million insurance policies, as well as £26 trillion of outstanding uncleared derivatives contracts, pensions agreements and credit facilities.
According to the body, some contract will not be transferable, with some including specific provisions that allow for termination in the event of Brexit.
TheCityUK said that in some cases contracts would require special regulatory intervention, while others would need new entities to be set up and capitalised.
To make matters worse TheCityUK says that European regulators will now find themselves taking on oversight of products and services they have not previously had to regulate.
There are potential solutions to ensuring contract continuity, also known as ‘grandfathering’, according to TheCityUK, these include:

  • a bilateral agreement between the UK and EU
  • separate regulatory action or legislation in each jurisdiction
  • specific provisions in the EU Withdrawal Agreement

However, the body warns that all three would necessitate ongoing regulatory co-operation between the UK and the EU, something that may not be welcomed by Brexiters.
“The smooth operation of financial markets and the continued ability to service customers and clients is the foremost priority for providers across Europe,” the group said.
“It is in the mutual interest of the UK and the EU, and most importantly, customers on both side of the Channel, that an urgent agreement is struck on the ability of these contracts to be grandfathered, either for a defined period or potentially until maturity.
“Technical issues, such as contract continuity, can most effectively be addressed separately from the political negotiations.”
Miles Celic, Chief Executive of TheCityUK, added: “Without a viable solution, millions of people could be left without a safety net. This must not be sucked into the Brexit negotiations. It is a non-political, technical issue and needs a non-political, technical solution.
“Continuing to be able to serve customers and clients is the industry’s number one priority. While firms are doing everything they can, this is not a problem that businesses can fix alone and requires a coordinated UK/EU approach. Without it, people and businesses across Europe could be left dangling over a cliff edge following Brexit.”
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