Trade in goods threatens to get stuck between the United Kingdom and the mainland if there is no brexit deal. But what about banks, insurance companies, accountants and stockbrokers?
The financial sector-banks, insurers, accountants – do not supply physical products, so you do not have to expect customs problems, trade deficits and disputes over fishing waters after 1 January when the United Kingdom will be sailing. However, these companies must also regulate permits, adapt to new laws or set up new establishments in order to keep themselves and, therefore, the whole economy running a bit. How are they doing? And will the brexit hurt them economically?
In order to be able to serve customers in the United Kingdom after New Year’s day, Dutch banks (and insurers) have to apply for a new temporary scheme in that country. That Temporary Permissions Regime gives them the right to do business across the channel for another three years, let De Nederlandsche Bank (DNB) know. ” During these three years these institutions will then go through the necessary permit path, for example to set up a subsidiary or branch”, a spokesman informs us. All Dutch institutions for which this is relevant have already done so, says DNB. ING, Rabobank and ABN Amro already have a branch in the UK.
Should the banking community still be worried about major losses because of Brexit? That doesn’t seem so bad. ” In itself, I expect Dutch banks to be a little less at risk with a hard brexit than banks from other member states, ” says Johann Scholtz. He is a stock exchange analyst at the American Morningstar and follows the role of European banks. In his view, Dutch banks are slightly less heavily represented in London with their business branch than (larger) banks from Germany and France. So they have less big clients who they handle big assignments for. And that means that they will also suffer less from unexpected falls in exchange rates, or other turmoil in the market that causes those big customers to lose money.
Every year, the United Kingdom provides the EU with EUR 2.2 billion of auditing services, and conversely, it uses European accountants for EUR 1.1 billion. A report from the British government shows this. What’s gonna change that after Brexit? For large offices not much, they already have offices in the UK and in the rest of Europe. For the small offices much depends on the agreements between Brussels and London.
The Cima group of British auditors is most concerned about the mutual recognition of vocational training and qualifications, as she said a few weeks ago to a committee of the House of Lords. If no agreement is reached, British accountants will not be able to work here without delay, unless they work in a large and widely recognised office.
Smaller offices in the Netherlands can continue to serve their British customers through SRA, which has some 370 offices connected to them. This is independent of the outcome of the negotiations, let SRA know.
Stockbrokers are now looking tense at the negotiations between the British and the EU. Because they are not yet clear on an important point: will the EU recognise financial supervisors and permits from the United Kingdom, and vice versa? If so, not much will change and stock exchange trading across the border can practically continue as it is now. But if not, a lot will have to be settled in the long run, says Paul Koster, chairman of the Association of securities owners.
“Securities dealers will first have a transitional regime of a few years, but will then have to apply for new licences to deal in English shares. For those who deal in securities through a Dutch large bank there is less change, because those banks already have a branch in the United Kingdom.”What that does to the ‘merchantability’ of shares, to the market in general, is still completely unclear, according to Koster.
Some companies are going to have a problem in any case, regardless of these marketing authorisations. These are companies with a Dutch legal form, such as an NV, which are now listed on both the Amsterdam and London stock exchanges, but only in London. Just Eat Takeaway is an example of this, according to Koster. According to him, shareholders have fewer rights in such a situation, particularly in the case of acquisitions and their supervision.
Are the British coming here?
In the meantime, DNB and the Financial Markets Authority (AFM) have together issued some 40 Brexit-related permits for financial institutions wishing to establish themselves in the Netherlands from the United Kingdom, DNB says. These include banks, insurers, payment institutions and investment firms. In addition, British banks have often already been licensed in other member states, so that they can continue to serve Dutch customers from there.
He also noted that British banks had been setting up branches in the European Union for some time. “Especially in Frankfurt, Paris and Dublin. Less in the Netherlands. This is not always about the origin of English banks. Many American banks also had their headquarters in London for their European customers. Think of Goldman Sachs and JP Morgan.” They too crossed the channel. Even with a Brexit deal, they may not offer all services to their European fixed-country customers.