(Sharecast News) - The Bank of England and the Financial Conduct Authority have told the City to prepare for potential market disruption when the UK leaves the EU at the end of 2020.
The BoE's Prudential Regulatory Authority and the FCA said measures were in place to safeguard financial stability if there is a no-deal Brexit on 31 December. UK households and businesses will be able to use services from EU financial institutions after 2020, they said.
"However, financial stability is not the same as market stability and some market volatility and disruption to financial services, particularly to EU-based clients, could arise," the regulators said in a letter to chief executives. "It is imperative that firms continue to build on their preparatory work to ensure that they, and to the extent possible their clients, are ready for a range of scenarios at the end of the transition period."
Risks include wholesale clients trying to switch business to EU entities in a rush close to the deadline and financial companies should make sure clients are fully prepared and taking the right action, the regulators said. Firms should also make sure they meet both UK and EU obligations at the end of the transition period for trading shares and derivatives.
If payments are disrupted financial firms should communicated promptly with customers and give them ways to make payments a different ways, the watchdogs said.
Retail banks should make sure they have plans in place to keep serving customers in the European Economic Area and act within local laws and national rules. Banks should treat customers fairly and give them plenty of notice to look for alternative arrangements if needed.
"In many cases, it would be a poor outcome for the customer for you to suddenly stop servicing them," the letter said.
The UK and EU have extended their talks about a trade deal with less than three months until the deadline for the end of the Brexit transition period. Any deal needs to be ratified by individual EU states leaving little time to reach agreement.
The City of London is Europe's financial hub and regulators have spent the past four years preparing for Brexit to achieve a smooth transition. Many banks and other institutions are shifting assets to the EU in preparation for the change.
LONDON MARKET OPEN: Stocks jump and pound heads towards USD1.42 mark