‘No-deal Brexit could cause finance chaos’

Bloomberg

Financial markets in Britain and the EU will face instability and significant business disruption if the UK exits the EU in March 2019 without a transition deal or final settlement on a number of crucial issues, a finance industry trade group warned.
There are at least five key areas where financial firms need clarity from UK and EU policymakers to avoid instability, the Association for Financial Markets in Europe said in a report published on Monday. These include an agreement on data transfers, continuity of contracts, legal jurisdiction, access to market infrastructure and recognition of bank resolution actions, according to AFME.
A quarter of all over-the-counter derivative contracts entered into by parties in both the UK and EU with a gross notional value of $36 trillion could be affected if UK financial firms lose their right to be recognised as properly regulated entities following Brexit, the group said. Of these, derivatives worth 12 trillion pounds are due to mature in the first quarter of 2019 alone.

No Cherry Picking
“Impairment to the servicing of these contracts could disrupt market functioning and make it more expensive for firms and households to insure against risks,” AFME said in the report.
It called on existing cross-border contracts to be grandfathered and existing service arrangements to continue until maturity.
Simon Lewis, AFME’s chief executive officer, said in a statement that “urgent action” from policymakers and regulators is needed to mitigate these “cliff edge” risks—disruption that would occur if the UK leaves the EU without a transition deal or
final settlement.
Michel Barnier, the EU chief Brexit negotiator, has ruled out maintaining easy access to the continent’s financial markets for British firms as part of a trade deal, saying that this would be tantamount to allowing the UK to “cherry pick” some aspects of EU membership.
But the leaders of individual EU member states have taken a less hardline position, meaning some agreement that would provide special access for UK financial firms may still be possible.