This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The UK Financial Conduct Authority (FCA) has told several international lenders that have operation in the City of London to limit the number of clients they shift overseas as a response to Brexit in a letter first reported by Financial News.
The FCA warned banks that they should take ‘the minimum necessary changes’ to where their customers are based, with the financial watchdog stressing that it was more than willing to intervene if it believes that international banks are exposing clients or markets to ‘unacceptable execution risks’.
FCA gets tough on Brexit
In the letter, the FCA goes on to tell banks that it is expecting them to focus on ‘day one readiness’ to ensure that the fallout of Brexit is limited ‘to avoid hard to the clients they serve’ and ‘market in which they operate’.
‘Clients should not be moved out of the UK until the FCA is satisfied that the relevant UK boards and/or senior managers have fully considered the impact of their firms’ proposals on every category of client, including whether their proposed changes are in each client’s best interests,’ the letter continued.
Major banks and other financial institutions have ramped up their Brexit preparations since UK Prime Minister Theresa May agreed a deal with EU leaders in late-November, with many buying up office space in key European financial hubs like Paris, Frankfurt and Dublin to limit the impact of Brexit on business.
The recent letter by the FCA provides a degree of clarity for banks at a very uncertain period.
The UK financial watchdog also gave guidance for banks non-EU clients, which it said would have a post-Brexit regulatory framework that offers ‘equivalent outcomes to the EU27’. Therefore, under this framework, if banks did move clients out of the UK, it could leave them exposed to ‘increased costs and risks to which they would otherwise not be exposed,’ the FCA added.
‘Where firms are looking to make changes . . . which may impact non-EU 27 clients, they should discuss those plans with us.’