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Brexit: Implications for US financial institutions
The world turned upside down?
The decision by voters in the United Kingdom to exit the European Union, known as “Brexit,” was a surprising one. As a result, financial services institutions (FSIs) in the UK and Europe will bear the brunt of this event over both the short and longer term. Read this series from the Deloitte Center for Financial Services to understand the impacts of Brexit for US banking and capital markets, commercial real estate, insurance, and investment management.
- US banks and capital markets firms
- US commercial real estate firms
- US insurers
- US investment management
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US banking and capital markets
The US banking industry’s mood shifted from self-congratulation—all large US banks exceeded regulatory capital minimums in the Dodd-Frank Act Stress Tests (DFAST) for the second consecutive year—to one of heightened anxiety about the fallout from the Brexit vote. Even banks that do not have a presence in the UK or the EU now have to consider myriad implications.
US commercial real estate
Amid all the uncertainty in the post-Brexit world, one thing is certain—US commercial real estate (CRE) firms will be challenged in doing cross-border business. And the situation can get exacerbated if Brexit has a cascading impact and other countries seek to leave the EU. There are several initial implications of the potential changes for US CRE firms, which includes owners, brokers, and engineering and construction players.
The June 23 Brexit vote took place less than a week after the signature global stakeholder seminar of the International Association of Insurance Supervisors (IAIS) in Hungary—with the next IAIS meeting scheduled for London in 2017—aptly captures both the irony and uncertainty facing US insurers. It is too early to call out the detailed implications of Brexit and the timeline for those changes. However, it does raise a great deal of uncertainty for insurance companies and increases the challenge of doing cross-border business.
US investment management
With the disruption Brexit has brought, uncertainty has hit the capital markets in such a magnitude that US investment managers have to address both short-term and long-term impacts. In the short-term, the perceptions of investors and their financial advisers must be priority one. After the first few weeks, as uncertainty and volatility in the capital markets transition to business planning and problem solving, investment managers can shift focus.