The Financial Conduct Authority’s Brexit chief has warned there are still unknown risks of disruption to the financial sector should the UK crash out of the EU without a deal.
Nausicaa Delfas, executive director of international at the Financial Conduct Authority and responsible for the FCA’s Brexit preparations, said the EU’s “patchwork” approach to no-deal has left the financial sector vulnerable to possible disruption.
Speaking to the PA news agency, Ms Delfas said that, while the UK’s financial watchdog has done “everything we can” to guard against the effects of a cliff-edge withdrawal over the past three years, the EU has not yet come up with a uniform approach.
Ms Delfas said: “In a nutshell, we have done everything we can to ensure continuity of business in the UK.
“On the EU side, there’s a patchwork of solutions and, because of that, if there is a hard exit, there could be some disruption.”
She added it was “difficult to say” at this stage what form that disruption might take.
“Because there’s a patchwork of solutions where everybody is playing their part to ensure continuity, there could be some gap between those that nobody has thought of, or that doesn’t quite work,” she added.
But Ms Delfas stressed that the UK financial watchdog and its EU counterparts “stand ready to take a pragmatic approach were anything like that to happen”.
The UK has prepared a uniform approach in its contingency planning, essentially carrying over the same EU regulations, but in Europe it has been left up to individual member states to draw up their own rules.
Apart from any possible market volatility, the FCA said the main risks to the financial sector relate to data and the EU’s General Data Protection Regulation (GDPR), as well as on share trading obligations and derivatives trading.
The EU has not found an equivalent for GDPR in the UK in the event of a hard Brexit, so firms and customers have had to take their own steps to make sure data can continue to be transferred from the EU to the UK.
On share trading and derivatives trading risks under a no-deal, Ms Delfas said the FCA is currently working to secure a mutually equivalent solution with the EU.
The comments come after FCA boss Andrew Bailey recently warned there were still “issues to be resolved” in no-deal preparations with the EU, with overlaps between share trading regulations posing risks.
Ms Delfas insisted the FCA was “working constructively” with the EU on these remaining issues and said its “door remains open”.
With just 24 days to go until Brexit day, the FCA is also urging the smallest of the 58,000 financial services firms it regulates to make sure they are prepared for all scenarios.
Ms Delfas said it is vital they double-check how Brexit could affect not only their business, but their customers or suppliers in the EU and if they need to transfer data from the EU to the UK.
The FCA has been running an advertising campaign signposting its Brexit websites, as well as a telephone helpline for firms.
Calls to the helpline have surged recently, from around 10 a week when it first launched early in September, to 90 a week now.
Ms Delfas is also urging EU financial firms that do business in the UK to ensure they have applied for the temporary permissions regime ahead of the October 30 deadline.
The FCA has already seen up to 2,000 firms and 9,000 funds sign up for temporary permissions, which will allow them to continue operating in the UK if the so-called passporting regime falls away abruptly after Brexit.