Banks need to step-up their preparations for a ‘no deal’ Brexit, the EU’s finance watchdog has said amid a stalemate in negotiations.
The draft Brexit deal includes a transition period which would give business until 2021 to plan and adapt for any changes to trade.
But the European Banking Authority (EBA) has warned firms that a deal is “not guaranteed” and said contingency planning for a “no deal” scenario has so far been “inadequate.”
“The time for the required actions to be taken is reducing,” said the EBA statement, which comes days ahead of a European Council meeting which is set to express concern about the lack of progress being made in Brexit talks.
Yahoo! Finance has revealed how just 5% of the draft Withdrawal Agreement has been signed-off by both the UK and EU over the last three months of negotiations.
There are now just four months left for the outstanding issues – more than 20% of the document – to be agreed on before the October deadline for a Brexit deal.
Under these circumstances, EBA chair Andrea Enria said: “Firms cannot take for granted that they continue to operate as at present nor can they rely on as yet unrealised political agreements or public policy interventions.”
“Risks, capacity and legal implications must be examined and addressed.”
The watchdog set out six risk reduction measures to be taken by banks in both the UK and EU, including identifying direct exposure to counterparties and putting in place plans to comply with data rules.
The EBA, which is moving from London to Paris as a result of Brexit, said banks must not put financial stability at risk by trying to avoid short term costs from forward planning.
Meanwhile, international businesses have called for “urgent progress” to be made over Brexit at this week’s EU leaders’ summit.
The bodies representing US, Canadian, Indian and Japanese firms with investments in the UK and EU issued a joint statement calling for the Irish border issue to be put to one side in order for progress to be made on the other outstanding issues, such as governance of the deal and regulatory cooperation.
It said: “Reaching agreement on these issues will provide businesses with more confidence that a Withdrawal Agreement can be agreed and ratified, thereby providing legal certainty for the proposed transition period and avoiding the worst-case ‘cliff-edge’ scenario.”