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Markets and Securities Services |
International
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The UK currently enjoys a position that it
would never achieve again were it to exit and
subsequently reapply for EU membership. This
is evident from the chart opposite, which was
published by the European Commission in a
March publication.
1
The current position is relatively attractive for
UK-based asset managers, with full access to
the EU Single Market and the use of passports
under UCITS, the AIFMD and MiFID. Their
ideal scenario would be to retain access to the
Single Market and all these passports, but this
is unlikely. The debate has now moved on for
reasons explained below.
All seem to agree that some form of bespoke deal
is needed. This does not simply arise from the UK’s
potential wish list but from the interconnectedness
of the financial markets between the UK and the
other European countries. And, of course, the UK
remains an asset management hub. But, at this
stage, we have no idea what the new deal for the
UK will look like.
The UK government’s white paper published
on 30 March 2017
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: Legislating for the UK’s
withdrawal from the European Union makes no
mention of specific details — and in opening any
negotiation, this may be expected. Certainly
the financial services industry would hope that
the government would pursue the best possible
position for UK-based financial institutions and
that the opening position should involve asking
for full access, even if in the end there is some
compromise reached.
The other side of the coin is, of course, what
might be the EU’s position. Aside from the
European Commission’s March “Way Forward”
document,
3
the European Council published
guidelines on 29 April
4
regarding the overall
positions and principles that the EU will pursue
through the negotiation — but, as one would
expect, these are relatively high level.
So it is impossible at this stage to predict how
the politics will work through. In any political
debate, there is a risk that we, at best, lose
the intricacies of detailed issues and, at worst,
sometimes politicians reach an outcome
detached from them. So the worst-case scenario
is that we could be looking at some form of
disorderly exit with no special advantageous
position going forwards; the best case scenario,
some useful form of mutual recognition system.
The only specific information we have so far
is that which is contained within the “Great
Repeal Bill”. The UK government has put great
emphasis on the bill. However, it is a bill which
is to convert EU law into UK law: so it is not
really a repeal bill. Nor is it of itself great —
it is a relatively short bill, now explained in
the government’s white paper.
The bill seeks to do the following:
• To repeal the European Communities Act 1972
and return power to UK institutions.
• To convert EU law as it stands at the moment
of exit into UK law before the UK leaves the EU.
• And to create powers to make secondary
legislation to enable corrections to be made
to the laws that would otherwise no longer
operate appropriately once the UK has left the
EU, and also enable domestic law, once the UK
has left the EU, to reflect the content of any
withdrawal agreement under Article 50.
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THE LIKELY IMPACT OF THE
23 JUNE EU REFERENDUM ON
UK-BASED ASSET MANAGERS
While we have no clarity on what the post-Brexit picture will look like, we
can now “set the scene” and identify key topics for consideration, as asset
managers look at their options. If they have not already done so, asset
managers must start making plans to adjust their business models and
group structures. But what exactly are we looking at? And what should
asset managers draw from it? This article takes a closer look.