The Association of Financial Markets in Europe (AFME) has published a new report that looks at the challenges in Brexit implementation for wholesale banking and capital markets. The report builds on an earlier study the AFME conducted in February on operational impacts and transformation challenges of Brexit.
The report notes that there are a number of uncertainties that wholesale banks will will need to deal with. These include:
- commercial uncertainty: during the negotiations considerable uncertainty will remain about the political developments and the new relationship the EU27 and UK will end up agreeing on. Uncertainty will also exist around the steps that other market participants as well as clients will be taking. Nonetheless, banks will need to take decisions about structural changes they need to make. For this they need to make certain assumptions based on the information available at that time;
- operating model and organisational structure: based on assumptions, firms will need to take decisions about the design of a new operating model and organisational structure;
- regulatory approval: dependent on the decisions about the operating model and organisational structure, firms will need to obtain the necessary regulatory approval. This process will take time, particularly also given that other firms will undergo a similar process of seeking regulatory approvals. Firms will rely on the efficiency and speed of regulators to approve licenses and models; and
- people and premises: when having decided about the operating model and organisational structure, firms will need to bring the right people and physical infrastructure in place.