This financial product worth TRILLIONS could be at RISK if Brexit talks go pear-shaped
CITY MINISTER Stephen Barclay said £12 trillion in cross border derivatives are at risk over Brexit negotiations, far more than the £50 million Brexit bill.
The Tory MP said that trillions in financial products between the UK and EU at the ‘sharp end of the cliff edge’ and could become void in Brexit negotiations.
He was asked what would happen to the UK’s cross-border contracts in different Brexit scenarios.
Speaking to the EU Financial Affairs Sub-Committee on Tuesday, Mr Barclay said: “Well you’re absolutely right in that this is the major cliff edge.
“But I think that, and this came out of the evidence I saw the committee received from Sam Woods, this is a symmetrical risk.”
Getty/Parliament TV
Currently, UK-based customers can access cross-border financial services from EU-based banks through a regulatory framework and financial passport system. This will cease to apply after the UK exit from the EU.
He continued: “This is a risk that applies to both sides and if you look at over-the-counter derivatives that’s £12 trillion which is expected to be impacted post-March 2019.
“If you look in the insurance sector, 30 million EA (European Area) customers, £40 billion of insurance contracts, obviously the six million on the other side in terms of UK insurance customers from EA firms.”
“So this is an issue really at the sharp end of the cliff edge.”
The city minister added that the ‘optimum’ way of dealing with the potential lose of trillions was to add something in to the Brexit deal.
He said: “And you’ve quite correctly set out the options so you know, we’re very keen and we very much recognise that both sides that customers from both the UK and EA will be affected.
“The most effective mitigant to this would be a bilateral agreement under the Article 50 withdrawal agreement between the EU and the UK and that would the the optimum way of resolving this.”
He added that a no-deal Brexit was something they had considered but that because the impact would also be huge for the EU as well it would be in Brussels best interest to sort it out.
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Mr Barclay said “No-deal is in our horizon in so far as that’s not just what I say, I can point to the FBC financial stability report.”
“The impact of this 40 billion in insurance contracts, 30 million EA customers, 12 trillion of over the counter derivatives contracts is of a magnitude that it is one in which there is a commonality of interest between colleagues within Europe and in the UK.”
