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EU Economics

EU’s Brexit NIGHTMARE: Euro firms have £20TRN of contracts under threat if UK walks away

BANKS are facing seriously complex talks to in order to protect £20trillion worth of crucial financial contracts once Britain leaves the European Union.

brexit eu bank of englandGETTY

EU news: £20 trillion financial contracts could be at risk after Brexit


Derivatives trade between EU and UK businesses will have no legal basis after Brexit, unless a deal is reached, meaning disruption once the UK exits the bloc will create chaos across the Continent.

Derivatives are contracts agreed between two parties which specify the conditions of how payments are made.

The cross-border contracts are used by companies, banks and insurers to protect against sudden moves in interest rates and currency fluctuations.

Last week, Bank of England (BoE) governor Mark Carney urged British and EU negotiators to act quickly to reach a deal on the financial trades.

EU Brexit news UK economyGETTY

Derivatives will have no legal basis after Brexit – unless a deal is reached


He said tens of thousands of contracts involving “hundreds of institutions” were “in question” if negotiators could not agree on how to deal with them.

Mr Carney added: “It has to be solved ultimately by actions of the EU27 and the UK.”

And Eurosceptic Tory MP John Redwood said the issue shows how the EU nations badly need a Brexit deal.

He said: “It’s massively in their interests to have smooth arrangements for the day after we’ve left.

Tory MP John Redwood

“I just hope they respond positively to the Prime Minister’s very generous approach, otherwise we will just be leaving without a deal in place.”

The BoE has consulted the International Swaps and Derivatives Association, which represents dealers, in a bid to solve the problem.

BoE’s Financial Policy Committee (FPC) issued a statement saying: “The two-way nature of derivatives means both UK and EU firms doing cross-border business may require appropriate permissions.

“A comprehensive solution is therefore likely to require the development and passage of legislation in both jurisdictions in order to protect the long-term validity of existing contracts.”

Bank of England governor Mark Carney GETTY

Bank of England’s Mark Carney urged UK and EU negotiators to act quickly to reach a deal


Simon Lewis, chief executive of the Association for Financial Markets in Europe (AFME) told The Daily Telegraph the body supported the statement from the FPC.

He said: “We welcome the Bank of England’s call for clarity on the issue of cross-border contracts post-Brexit.

“€1.3 trillion of UK-based bank assets are related to the cross-border provision of financial products and services and these are supported by a very significant volume of contracts.

“We therefore fully support early action to clarify that contracts will continue following Brexit.”

http://www.express.co.uk/news/politics/861264/EU-Brexit-news-UK-economy-financial-contract-risk-derivative-Bank-of-England-Mark-Carney

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