Nicky Morgan, newly installed head of the Treasury Committee, has asked the Prudential Regulation Authority (PRA) for details of how the financial services sector is preparing for the possibility of a ‘hard’ Brexit where no trading agreement is reached in advance of the UK’s departure from the EU
Morgan has released a letter sent to Sam Woods, the PRA’s CEO of the Prudential Regulation Authority (PRA), requesting information on the PRA’s recent survey of regulated firms that undertake cross-border activities between the UK and the rest of the EU. In it she indicated that the committee is likely to be examining the implications of Brexit for the financial services sector when it begins work in the autumn.
Morgan said: ‘The cliff edge facing businesses in April 2019 is a cause for concern, particularly in the financial services sector. Based on the information the PRA has collected, I have asked Sam Woods about how banks and insurers will respond as the Brexit deadline approaches, and the key risks of a “no deal” scenario.
‘I have also asked Mr Woods for his views on the desirability and design of a transitional arrangement with the EU, to provide more time to negotiate and prepare for a new UK-EU economic relationship.
‘Getting these arrangements right will be crucial for ensuring that the City retains its pre-eminence as a global financial centre, and to protect the economy and jobs as the UK leaves the EU.’
In April the PRA asked firms to supply a summary of their contingency plans for Brexit, including details of what they intended to do if the UK leaves the EU with no agreement on the future framework for cross-border financial services provision and no transitional arrangements.
Firms had until mid-July to reply. Morgan is now asking for information about whether all have done so, the PRA’s assessment of their state of readiness in the event of a ‘no deal’ scenario, and what actions they plan to take. She also asks whether firms that are underprepared share common characteristics.
The Treasury committee chair says she wants to establish whether the collective execution of ‘no deal’ contingency plans poses a material risk to financial stability, and whether firms are waiting for their competitors to execute their contingency plans before activating theirs.
In addition, Morgan asks whether transitional arrangements should be put in place, including a bridging period between the end of the Article 50 negotiations and the start of a new UK-EU economic agreements.
The letter gives the PRA a deadline of 2 August to reply.
