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Brexit: Beyond Day 1

How will banks reconfigure their capital markets business?

Since the UK voted to leave the EU on 23 June 2016, Brexit has dominated headlines, as well as the agendas of policy-makers, regulators and Boards. In the course of November 2018, EU and UK negotiators agreed the draft Withdrawal Agreement, together with the outline of a political declaration on the future relationship between the UK and EU. However, much uncertainty still remains and the debate in the financial services industry is focused on how firms will operate across Europe from Brexit “Day 1” on 30 March 2019 in the event there is no Withdrawal Agreement or transition.

While what happens by Brexit Day 1 is clearly very important, it is only the first chapter of the story. Relative to today, the new structure for many banks’ capital markets business will be inefficient. In this briefing, our Deloitte EMEA Centre for Regulatory Strategy looks beyond Brexit Day 1 at how regulatory developments might affect how global banks reconfigure their capital markets business in the medium term, focusing on the provision of investment services and activities.

In executing Brexit plans, banks need to be ready to adjust their strategies in response to shifts in the balance of market liquidity and clearing, whether driven by regulation, market forces or client preferences. The key sections in this briefing examine the following issues:

  • the inefficiencies in Rest of World and UK banks’ post-Brexit structure relative to the status quo;
  • the footprint banks need to have in the UK relative to the EU
  • market access to the EU;
  • the implications of Brexit for market liquidity; and
  • the future regulatory and supervisory environment in the UK relative to the EU.
Brexit: Beyond Day 1
Banks will increasingly be considering where to locate their European investment services and activities. Which way will the pendulum swing: towards the UK, or the EU, or away from both?

About the EMEA Centre for Regulatory Strategy

The Deloitte Centre for Regulatory Strategy is a powerful resource of information and insight, designed to assist financial institutions manage the complexity and convergence of rapidly increasing new regulation.

With regional hubs in the AmericasAsia Pacific and EMEA, the Centre combines the strength of Deloitte’s regional and international network of experienced risk, regulatory, and industry professionals – including a deep roster of former regulators, industry specialists, and business advisers – with a rich understanding of the impact of regulations on business models and strategy.

You can find more reports like this at Deloitte.co.uk/ECRS, where you can also sign-up for our monthly risk and regulation newsletter.

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