EBA: Urgent to prepare for a Brexit without a ratified withdrawal agreement

In accordance with Article 50 of the Treaty of the European Union, the UK's withdrawal from the EU will take place on the date of entry into force of a withdrawal agreement, or – if no agreement is in place – two years after the notification to withdraw (30 March 2019).

As of today, a withdrawal agreement is still not in place. Without a ratified withdrawal agreement, the UK will leave the EU on March 30, 2019 by operation of law without a transition period. The EBA has been monitoring the level of contingency planning and other preparations undertaken by financial institutions, and it is the EBA's opinion, that planning should advance more rapidly in several areas.

Considering these circumstances, the EBA has issued an official opinion where it highlights its expectations relating to the competent authorities and their obligation to ensure that financial institutions are preparing adequately for Brexit. 

In the opinion, the EBA especially emphasizes that financial institutions are to consider and mitigate the risks entailed by the possible departure of the UK from the EU without a ratified withdrawal agreement. The EBA also highlights that competent authorities should draw attention to the customer protection obligations bestowed upon financial institutions in these circumstances. 

Kromann Reumert's recommendation

In our opinion, there is a real risk that no agreement will be reached by 30 March 2019 and we recommend that EU27 financial institutes familiarise themselves with the EBA's recommendations, particularly regarding the identification of risk channels arising from Brexit. These could for example be risks derived from direct financial exposure to the UK, existing cross boarder contracts with the UK, or reliance on UK financial market infrastructures.

Read the full EBA opinion, which also sets out a sequence for financial institutions' assessment of the implications of Brexit.

If you have any questions in light of the latest EBA opinion, we are happy to elaborate further.