Chancellor admits Brexit creates risk of 'illegal' financial contracts

Chancellor admits Brexit creates risk of 'illegal' financial contracts
Coherence between regulatory regimes will be an essential component of the deep trading relationship in financial services that we seek to negotiate with the EU.

Chancellor Philip Hammond has admitted that financial services firms could lose the legal authorisation to service existing contracts post-Brexit.

Hammond says the Government is "alive to the risk" that Brexit could create 'legal uncertainties' surrounding the status of existing cross-border insurance, pension and other financial services contracts sold under passporting arrangements.

Responding to MP Nicky Morgan, who wrote to Hammond last month about the treatment of such contracts, he said the Government recognises that Brexit "has the potential to impact the continuity of service provision at the point of exit".


Morgan, who is also Chair of the Treasury Committee, raised concerns that UK expats could lose their pension payments unless a post-Brexit deal is found.

She says that although the UK and European Commission have published papers covering the status of goods already placed on the market, "less consideration has been given to services that are being supplied at the point of exit, and particularly the hundreds of thousands of insurance contracts sold under passporting arrangements with a duration that extends beyond 29 March 2019".

Morgan warned that without further action, "insurers will lose the legal authorisation to service these contracts: they must break the contract or break the law".

In his response, Hammond says the government, Bank of England, FCA and PRA have been "actively engaging with the financial services sector" to ensure they have comprehensive plans in place for the full range of possible outcomes.

He added that maintaining coherence between regulatory regimes "will be an essential component of the deep trading relationship in financial services that we seek to negotiate with the EU".

Hammond said this is "likely to mean agreeing supervisory arrangements that are symmetrical, reciprocal and reliable, and that address legitimate financial stability concerns".

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