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Clifford Chance

Clifford Chance


Time to adapt: Achieving an orderly transition for banking

30 November 2016

The UK has voted to leave the European Union, and the UK Government intends to trigger Article 50 by March 2017. This will start a complex and potentially challenging two year process where the UK and EU27 must work together to establish a new partnership that works for customers, businesses and the economies of the UK and EU27.

The financial services sector is one of the success stories in the EU. With more than £1.1 trillion of cross-border lending from UK-based banks to European companies and governments the free trade in financial services contributes to the national economies of the UK and Europe. These activities are underpinned legally by the passporting regime which allows UK-based banks to provide services to customers in Europe and EU based banks to provide services to customers in the UK. It also allows banks in one EU Member State to set up branches in any other with minimal additional authorisation.

The UK’s exit from the EU will require both parties to work together and construct a new partnership to enable customers and businesses to continue to receive the level of services they receive today.

While the nature of the new partnership between the UK and EU27 is still unclear, banks and their customers are faced with existing rights and obligations suddenly disappearing at the end of the two year Article 50 period. Without new arrangements in place enabling the provision of the financial services we have today, there will be significant commercial disruption to the services enjoyed by millions of businesses and customers across the UK and the EU27 and harm to their economies. Transitional arrangements are critical to help avoid this – they can help bridge the gap between the end of the two year Article 50 period and the putting in place of the new UK/EU partnership, giving policy makers the time to reach an agreement and ensure a smooth and orderly transition to a new partnership.

To inform this debate, UK FInance has worked with Clifford Chance and Global Counsel to help to clarify why transition is needed and how transition arrangements may be structured to avoid a disorderly exit and deliver the most positive outcome for UK and EU27 citizens. This report builds on the analysis in the UK Finance August 2016 report, UK exit from the EU: an orderly transition for banking, prepared with the support of Clifford Chance and Global Counsel.

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