The “peak of uncertainty” has reached the whole of Europe as the most regulatory and financial authorities rush to save the harshest effects of the UK leaving the EU within only 36 days for the transition period. A combination of politics and trading data, the EU concern about Britain diverging from continental rules, and Europe’s push for greater control of euro-denominated activities has left the sector facing unanswered questions about its operations after January 1.
None of the sides agrees to make the common ground and financial services left outside the scope of Brexit talks. The authorities fear that the lack of clarity could lead to market dysfunction and inflated costs for clients after a year in which coronavirus has taken its toll.
The chief executive of London Stock Exchange Group, David Schwimmer made a comment regarding the very uncertain period. He said that currently, it looks like the EU will make sure that there is a cost to Brexit. It looks like the EU wants to show that Britain shall be on the side of the losers and that it has lost one of the biggest global businesses which enable participation in the global markets. He also said that it is important to hear out everyone’s interest and to be cooperative.
More cooperation would not hurt
David Schwimmer, chief of the London Stock Exchange Group, called for ‘less fragmentation and more co-operation’. Just unlike any economic sector, the financial service industry has suffered a lot from the Brexit process. Though the topic is all about the UK-EU relationship. The definitive factor is the separate British and European economy overall.
The recent fact made the situation even more difficult. The EU rejected the UK proposal to include the detailed financial services chapter. The issue would cover the cooperation in trade deals, which might be the first attempt for Britain to retain market access to the EU once again.
The exclusion of the bank’s exchanges and other parts of the economy means that the international players with trading opportunities will be counting on some new agreement between the EU and UK. Some of the big companies already have big plans, which might be executed at the last minute.
The real estate company prices have been volatile for some time already. The special changes have been observed once Goldman Sachs made an announcement last week, talking about the importance of the set up of a hub in Paris for SIgma X. This shall assure the trading of European equities.
Besides certain markets and industries suffering a lot from Brexit and there is a huge bubble of uncertainty, it should be mentioned that the stocks and the forex market have suffered a lot as well. According to one of the largest forex brokers list, the brokers who offer the GBP currency pairs have decreased in popularity significantly. The reason for that is the strong inflation and fluctuation of the currency because of Brexit and the ongoing changes in social life. The forex industry is expected to go through some more changes in the near future as well.
The future plans
The chaos is obviously expected around the whole situation between the UK and EU. The regulations also finalize a late change seeking to avoid chaos.
It is already obvious as well as proof that Britain started to seek ways to remain in the European market no matter what. The country wants to preserve the benefits of the single market after Brexit is over. Though, the EU insists on ceasing the further relationship and sets the full stop on the cooperation and the market-access rights.
While the EU seems to stay away from the further EU-UK relationship, Brussels remains silent about equivalence decisions that can be expected. EU officials acknowledge that despite the equivalence being formally separated from the talks on the future relationship with the UK, the two issues are politically connected. Brussels is deeply reluctant to show its hand while trade talks are undecided, not least because of the complicated politics of acting while the fate of sensitive EU sectors, such as finances, remains uncertain.
The European Securities and Markets Authority said on Wednesday that it would not soften EU rules for parts of the derivatives market, despite the possibility that they could leave London outposts of EU banks unable to trade. Both Esma and the UK Financial Conduct Authority said the issue could be fixed by equivalence decisions, but that this was outside their purview.
“For the European banking industry it isn’t the end of the discussion, but we knew the solution wouldn’t come from Esma,” said a senior executive at a European bank. “It will go to the wire. We’re expecting to hear something concrete from the European Commission near the end of the year.”
The EU keeps reminding everyone that the warnings regarding the difficulty the UK would have had in the dynamic future of the Brexit reality. Britain, on the other hand, has made clear that the goal of leaving the EU is to break free from European rules. Some are encouraging the UK to introduce new rules and make new trials, while others encourage the country to keep aiming at the goal it has set prior to Brexit.