The European Central Bank and the Bank of England have been drafted in to study the threats that Brexit poses to financial services. Just don’t expect this “technical working group” to save the day.
Brexit’s potential to disrupt trillions of dollars of derivatives contracts and tens of millions of insurance policies has emerged as a point of contention between the U.K. and European Union, with British policy makers calling for a coordinated legislative solution to prevent market turmoil. The EU says the industry should take the lead.
With the politicians in a standoff, the U.K. sees the working group, formed at the request of the European Commission and the U.K. Treasury, as a way to generate solutions that will allow banks and insurers to continue servicing contracts after Britain’s withdrawal from the EU, according to people with knowledge of the matter.
The Europeans are more restrained, saying the group will concentrate on analysis of the risks and leave the fixes to the politicians, the people said, asking not to be identified as the discussions are private.
The group’s work will be separate from the Brexit talks, according to a U.K. government statement on Friday. It will be chaired by ECB President Mario Draghi and BOE Governor Mark Carney, but beyond that little is known. Its membership and meeting schedule haven’t been determined, one of the people said. And with less than a year until the U.K. quits the EU, it’s unclear how much analysis the group will have time for.
The U.K. has made the case that the industry on its own won’t be able to address the threat, and policy makers need to ensure that firms have the permissions they need to service contracts after Brexit. So far, the EU has been unimpressed by the claims. Valdis Dombrovskis, the EU’s financial-services policy chief, said this week that the bloc sees no “evidence that most of the issues couldn’t be solved by the private sector itself.”
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