The European Commission outlined its contingency plans for financial services and other sectors in the event of a "no-deal" Brexit.
The commission published Wednesday — 100 days ahead of the U.K.'s exit from the region — a package of 14 measures related to sectors under which a no-deal scenario "would create major disruption for citizens and businesses" in the remaining 27 European Union member states.
Among the measures are plans for financial services, though there was no mention of money management or retirement plan provisions. The commission said that following "a thorough examination of the risks linked to a no-deal scenario in the financial sector," it had found only a limited number of contingency measures were necessary to "safeguard financial stability in the EU27."
The commission has decided to put in place three plans related to financial services, all related to central clearing of derivatives:
- A temporary and conditional equivalence decision for 12 months to ensure no immediate disruption in derivatives clearing.
- A temporary and conditional equivalence decision for 24 months to ensure no disruption in central depositaries services, which facilitate securities transfers, for EU operators that use U.K. operators.
- Two delegated regulations related to over-the-counter derivatives contracts, where a contract is transferred to an EU27 counterparty from a U.K. entity.
In a document outlining the plans the commission added that in the financial-services sector, "firms should continue to take all the necessary steps to mitigate risks and ensure that clients continue to be served."
It said firms need to let clients know about steps they have taken, while EU clients of U.K. companies should "prepare for a scenario in which their provider is no longer subject to EU law."
The commission has now called on the European Parliament and European Council to ensure these plans are put in place by March 29.
The focus on derivatives was highlighted in a statement by Rachel Kent, a partner at law firm Hogan Lovells. She said that while these provisions are necessary, they do not recognize concerns raised by the industry in relation to other areas of financial services.
"We don't know for sure how extensive this problem is and how many contracts are at risk," Ms Kent said. "We hope the EU 27 will continue to consider exemptions in the way that we have been seeing over the last month. These give wider relief in the interests of market stability."
