Brexit – the impact on financial markets in Germany and Austria

The United Kingdom’s forthcoming exit from the EU will have major implications for European financial markets.


More than half of all Euro contracts worldwide are currently cleared in London. In addition, London hosts and supervises key exchanges such as the LSE and LME and trading platforms including Bloomberg and Tradeweb. Many European banks use ratings of UK based rating agencies in their credit risk models as well as other UK centric infrastructure essential for the operation of European financial markets.


Irrespective of the course of the exit negotiations, financial institutions should start making the necessary plans now:

 

1) Considerations for a global institution based in UK ("outside-in"):

  • relocation of credit and deposit business, securities or derivatives trading
  • rendering of licensed services such as investment advisory or brokerage
  • support services to wealthy European clients (wealth management, asset management)
  • relocation of corporate client business (including interest and FX derivatives, loans, corporate finance, trade finance)
  • support services to European institutional clients (including client derivatives, structured products, bespoke solutions)
  • transfer of the design and sale of retail and investment products

Each of these single situations would require different measures. These could cover the following aspects:

  • application for new licences and the efficient establishment of fundamental compliance with local standards in the new location, e.g. MaRisk in Germany
  • expansion of the trading and back office infrastructure
  • implementation of quantitative methods to value and manage a portfolio under altered regulatory framework conditions
  • the expansion of risk management and, where applicable, the registration of new or enhanced internal models for Pillar 1 under the new national and/or European regulatory authority
  • the implementation of regulatory reporting requirements of the new location, e.g. money market statistics
  • compliance with national financial reporting standards
2) Considerations for an institution outside the UK ("inside-out"):

 

  • link to another CCP or expansion to new asset classes
  • change of the transaction register, where applicable, as part of the implementation of a new reporting architecture via a central hub for EMIR, MiFIR, SFTR and, where relevant FinfraG
  • review of foreign stock exchanges, brokers, trading and back office partners
  • strategic reorientation of the UK business

We would be pleased to support you through the entire value creation chain: from strategy and proof of concept through analysis and planning to design and implementation in your IT systems.


With more than 700 capital market and regulatory experts in Germany, Austria and the United Kingdom, d-fine is the ideal partner to analyse the effects of Brexit and identify appropriate measures for your institution. Irrespective of whether your company is a UK-based institution trying to avoid losing access to the single market or a company based in Germany or Austria seeking to mitigate the effects of the loss of LCH.Clearnet’s status of "qualified CCP under EMIR", d-fine’s experts are on-hand to offer guidance and expertise in a time of unprecedented uncertainty.

 

Please feel free to contact our experts at info@remove-this.d-fine.de, key word "Brexit".