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Brexit: City warns millions at financial risk from contract crisis

A City of London trade body has warned of another Brexit crisis looming over us: Reuters
A City of London trade body has warned of another Brexit crisis looming over us: Reuters

Hardly a week goes by without yet another unforeseen Brexit complication rearing its head and pointing to things potentially getting very ugly in Britain as its clueless government lurches from crisis to crisis.

The latest to be filed under the heading “issues not being addressed” has been raised by TheCityUK, a trade body representing London’s financial centre.

It concerns how cross border contracts will be treated after Britain gets its decree nisi from a club it has prospered as a member of for four decades or so.

There are millions of them out there and they affect everything from insurance policies (some 36m in total) to pensions agreements to credit facilities to derivatives contracts.

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If some of those look arcane to you, if you think they’re the sort of things only City folk really need to worry about, you might be in for an unpleasant surprise.

You see, they have a nasty habit of spraying muck when things go awry. Or had you forgotten the effect of all those Mortgage Backed Securities the banks were playing around with that no one had heard about until 2008 dawned?

According to TheCityUK, some of them can’t be simply transferred. Some may have termination provisions triggered by Brexit requiring special regulatory intervention. Others will require the creation of new entities which then require things such as capitalisation and regulatory approval.

These problems, and others, are details no one seems to care about because, well, why bother with them when the really important thing is to persuade the Royal Mail to issue some commemorative stamps. Just ‘believe in Britain’, give the Royal Family a new yacht to play around in, and build a bridge between Scotland and Northern Ireland, and everything will be ok.

If the above looks like something you’ve heard before that’s because it is the sort of child’s fairy tale peddled by certain ministers (I’m looking at you Boris Johnson and David Davies) and their favourite press cheerleaders.

Yeah, go Brexit, woot, woot!

It is possible to solve the problems raised by the trade body in a number of ways. You could come to a bilateral agreement with the EU. You could include something in the EU withdrawal agreement. You could handle the issues with lots of separate regulatory actions or legislation with each affected jurisdiction, and create lots of jobs for civil servants. Anyone out there fancy a copper bottomed pension? Can we bring a few Sir Humphreys out of retirement?

All of the above would, however, ultimately require some sort of continuing regulatory alignment, which is something that gets the fundamentalists in a terrible tizzy but which regulators, who actually know what they’re talking about, recognise the need for.

They would also require politicians to stop behaving like small children denied a third ice cream on a summer’s day, but British politicians are a lot better at stamping their little feet and throwing tantrums than they are at coming up with deals that stand a chance of not skewering lots and lots of the citizens they claim to represent.

But maybe I’ll be proved wrong, and Theresa May will surprise the lot of us. It’s also still possible for Panama to win the World Cup after that nation’s opening game ended in a 3-0 defeat by Belgium. Except that there’s a reason that you can get 2,500-1 against it happening with bookmakers, which, coincidentally, looks about the right price for Brexit being a success given the shower we have in charge at Westminster.

It’s unfortunate for TheCityUK and the people it represents that while politics shouldn’t impinge upon issues of practicality like those that it raises, it’s almost inevitably going to do that.

It’s even more unfortunate for those of us who don’t have the sort of salaries they pay in the Square Mile to shield us from the financial turmoil we're at risk of.