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How Brexit May Affect Banks’ Business Models and the Financial System in the UK and EU: Opportunity to Revitalise the Existing Banking Structures?

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Abstract

The purpose of this article is to discuss the potential impacts of the Brexit on the UK- and EU-based financial institutions and the City of London specifically and to present the varied options available especially for investment banks, asset and wealth managers, payments services and insurance companies to plan for and achieve a smooth and orderly transition to a post-Brexit world. The analysis underlying this paper started in the immediate aftermath of the Brexit vote (in the six months following the referendum) and we reviewed a wide range of external sources, news articles and research papers as well as used insights from our own experience of assisting many financial services organisations in the UK and across the Europe, Middle East and Africa (EMEA) to review and restructure their operating models. We suggest that financial services organisations should use this transition period triggered by Brexit as an opportunity to build innovative and more efficient business models to help strengthen the UK and the EU banking systems.

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Notes

  1. 1.

    European banks using “passport” services to access the UK market.

  2. 2.

    Increasing to 2.2 million if jobs in supporting/ancillary services are included.

  3. 3.

    Citigroup also has a separately capitalised subsidiary in Dublin.

  4. 4.

    Daily volumes of overall renminbi trading reached US$61.5 billion in 2014, according to the City of London.

  5. 5.

    Investment banks obtain passport under CRDIV and investment firms under MiFID2.

  6. 6.

    The period to get an approval for the banking licence for retail banks might be even longer (circa nine months).

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Author information

Authors and Affiliations

  1. Bocconi University, Milan, Italy

    Claudio Scardovi

  2. Imperial college, London, UK

    Claudio Scardovi

  3. AlixPartners, London, UK

    Claudio Scardovi & Rabia Deniz Agaoglu

Authors
  1. Claudio Scardovi
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  2. Rabia Deniz Agaoglu
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Editor information

Editors and Affiliations

  1. CIDEEFF - School of Law, Univ of Lisbon, University of Lisbon, Lisbon, Portugal

    Nazaré da Costa Cabral

  2. CIDEEFF, University of Lisbon School of Law - Faculdade de Direito da Universidade de Lisboa, Alameda da Universidade - Cidade Universitária, Lisbon, Portugal

    José Renato Gonçalves

  3. CIDEEFF, University of Lisbon School of Law - Faculdade de Direito da Universidade de Lisboa, Alameda da Universidade - Cidade Universitária, Lisbon, Portugal

    Nuno Cunha Rodrigues

Glossary

AIFMD

Alternative Investment Fund Managers Directive

Article 50

Article 50 sets out the procedure by which a Member State can leave the EU

AUM

Assets under management

CCP

Central counter-party, also known as a clearing house

CRD

Capital Requirements Directive

EEA

European Economic Area

EMIR

European Market Infrastructure Regulation

Equivalence

Provisions in certain pieces of EU legislation allow market access to firms from non-EEA countries judged to have an equivalent regulatory and supervisory regime to the EU

EU

European Union

FX

Foreign exchange

KYC

Know Your Customer

MiFID

Markets in Financial Instruments Directive

OTC

Over the Counter. Refers securities traded outside a formal exchange

Passporting

The right for a firm registered in the EEA to do business in any other EEA state without needing further authorisation

ROE

Return on equity

UCITS

Undertakings for the Collective Investment of Transferable Securities

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Scardovi, C., Agaoglu, R.D. (2017). How Brexit May Affect Banks’ Business Models and the Financial System in the UK and EU: Opportunity to Revitalise the Existing Banking Structures?. In: da Costa Cabral, N., Renato Gonçalves, J., Cunha Rodrigues, N. (eds) After Brexit. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-66670-9_18

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  • DOI: https://doi.org/10.1007/978-3-319-66670-9_18

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-66669-3

  • Online ISBN: 978-3-319-66670-9

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

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