Maijoor Speech: Brexit – The Regulatory Challenges
Steven Maijoor, the Chair of the European Securities and Markets Authority (ESMA), delivered a speech on Brexit – the regulatory challenges at the European Financial Forum 2019 in Dublin:
The speech focused on ESMA’s preparations for a no-deal Brexit across a number of areas including secondary markets, clearing and settlement and cooperation agreements while also looking to the future of the European Union’s market after Brexit.
“The UK’s decision will sadly, but inevitably, move Europe’s biggest capital market outside of the Union. This is a major operation as, supported by the progress of the single market in the past decades, the EU27 and UK capital markets have become very interconnected. Carving out the UK capital market requires preparations for all circumstances, by all participants concerned, including for the real possibility that the UK leaves the Union without a deal.”
“Financial centres in the EU27 should be free to compete based on the particular strengths they can offer relocating firms, like speed and efficiency, but in all cases the EU rulebook should be consistently applied and supervised.”
“I would like to stress that Brexit has increased the convergence challenges of European financial supervision as the structure of the financial market is changing. Financial market activity concentrated in London is relocating to a range of hubs across the EU27 including Ireland. So, financial activity is moving from one regulator to a range of regulators, increasing the need for consistency and additional and stronger convergence tools.”
“The new EU27 environment will be one where there will be a large, liquid and interconnected capital market next door, which is not part of, or subject to, its regulatory requirements. This creates the need to have tools to react rapidly to new developments.”
EU counterparties have to wait until closer to exit date to novate contracts.
As market infrastructure is sticky, trading will stay in London -- at least for now.
Under a no-deal Brexit, no new UK-related data will be received and processed by ESMA.
The deals come into force if the UK leaves the EU without a withdrawal agreement.
The deals allow for continued close cooperation if there is a no-deal Brexit.