"The cliff edge facing businesses in April 2019 is a cause for concern, particularly in the financial services sector."
Nicky Morgan, Chair of the Treasury Committee, has written to Sam Woods, CEO of the Prudential Regulation Authority, requesting information on the PRA’s recent survey of regulated firms' contingency plans for the UK’s exit from the EU.
In April, Woods requested assurances that those plans covered the ‘most adverse potential outcomes’, in which the UK leaves the EU with no withdrawal or trade agreement, and no transitional arrangements to mitigate a sudden loss of market access.
Morgan said: “The cliff edge facing businesses in April 2019 is a cause for concern, particularly in the financial services sector. Based on the information the PRA has collected, I have asked Sam Woods about how banks and insurers will respond as the Brexit deadline approaches, and the key risks of a ‘no deal’ scenario.
“I have also asked Mr Woods for his views on the desirability and design of a transitional arrangement with the EU, to provide more time to negotiate and prepare for a new UK-EU economic relationship. Getting these arrangements right will be crucial for ensuring that the City retains its pre-eminence as a global financial centre, and to protect the economy and jobs as the UK leaves the EU."
Morgan has also requested information on the nature and timing of the actions firms will take as the risk of a no deal scenario rises, and how these actions will vary by the nature of the business they conduct (e.g. banking versus insurance).
Other concerns included whether a 'no deal' poses a material risk to the PRA’s objectives, and to financial stability more generally, and whether firms are waiting for competitors to execute their contingency plans before activating theirs.