The German-British Chamber of Industry and Commerce invites you to a webinar series and online discussions.
It starts with the topic “UK – The Corona-crisis and the impacts on Brexit” on friday, May 15th 2020, 8.00am UK time. Read more
It starts with the topic “UK – The Corona-crisis and the impacts on Brexit” on friday, May 15th 2020, 8.00am UK time. Read more
Kazuo Teranishi, correspondent for Asahi Shimbun, one of the oldest and largest national daily newspaper in Japan, interviewed Hubertus Väth during his visit in Tokyo in March 2020, which took part in the FinCity Global Forum (hosted by FinCity.Tokyo).
The countdown was projected on to the side of Prime Minister Boris Johnson’s office and residence at 10 Downing Street until Brexit’s completion on 31 January 2020, midnight Brussels time. Negotiations on future relations are underway. However, regulatory questions for the financial sector remain largely unresolved. London will – also in the well-understood interests of the EU – remain the leading financial centre in Europe for a long time to come. This does not mean, however, that the UK’s withdrawal will be without consequences. The cake will be newly cut, and Germany should use this opportunity to establish Frankfurt as the leading financial centre in the EU, all the while striving for constructive cooperation with London and Paris.
The European Union and the United Kingdom have agreed on a Brexit extension until January 31st, 2020.
Hubertus Väth, Managing Director of the Financial Centre initiative Frankfurt Main Finance, says:
“Frankfurt Main Finance welcomes the European Union’s decision to agree to an extension of the United Kingdom’s withdrawal from the EU. The chances of an unregulated Brexit to occur are now considerably reduced after the approval of the current agreement. We understand this to be a victory of reason.”
If you or your company are thinking about moving to Frankfurt, you surely have a number of questions. Some, of course, concern legal questions, but some others will be of a more practical nature. Practitioners from Dentons in Frankfurt and Hubertus Väth, Managing Director of Frankfurt Main Finance, invite you for a webinar to answer some of your questions. You can register for the Moving to Frankfurt Webinar here.
Join the event for a fast-paced, one-hour webinar that will bust open some of the myths typically related to living in Frankfurt and doing business within and outside of Germany.
Date: Tuesday, November 06, 2018
Time: 04:00 PM Central European Time
Duration: 1 hour
BRUSSELS and LONDON, 12 March 2018 – In a unique assessment of the business costs of Brexit, Oliver Wyman and Clifford Chance have partnered to calculate the impact of tariffs and non-tariff barriers on companies if the EU27 and UK reverted to a World Trade Organisation (WTO) trading relationship with each other.
The ‘red-tape’ cost of Brexit estimates that the direct costs will total around £31billon for EU exporters and around £27billon for UK exporters, with non-tariff barriers accounting for more of the effect than tariffs. The report focusses only on the direct impacts of the UK’s exit from the EU which are of immediate importance to companies for Brexit planning. It does not model additional impacts such as migration, pricing changes or third country Free Trade Agreements, which are likely to increase the overall impact.
In the EU27 the hardest hit sector will be automotive, where the direct impact will be around 2 percent of current GVA. Country level differences will vary considerably, with Ireland’s agricultural sector’s exposure to UK consumers, for example, a particular pinch point. In Germany, four of the sixteen states – Bavaria, North Rhine-Westphalia, Baden –Wuerttemberg, and Lower Saxony – will shoulder around 70 percent of the country’s direct impacts as a result of exports to the UK that arise from their leading global positions in automotive and manufacturing.
In the UK the Financial Services sector will take by far the biggest hit, incurring around a third of the extra ‘red-tape’ costs. However, there are very significant impacts in other sectors where firms are highly integrated into European supply chains – for example in the automotive, aerospace, chemicals and metals and mining sectors.
Kumar Iyer, Partner, Oliver Wyman, says: “There will be both winners and losers from Brexit. In order to navigate the uncertainty companies should be thinking about impacts under different scenarios both operationally and strategically. We see the best prepared firms taking hedges now based on the direct impacts on themselves, their supply chains, customers and competitors. Unfortunately we see that small firms are least able to take these steps at present.”
The impact assessment also reveals that the ability to mitigate the impacts of post-Brexit trade barriers will vary by sector and company size. Before designing their response, firms need to think through the impact on different levels: operations, supply chains, customers and competitors. Small firms will find this particularly challenging especially where they have no non-EU trade experience and may be rendered uncompetitive as they seek to make the changes needed. Automotive and aerospace industries will be able to localise supply chains and take advantage of domestic suppliers in some areas but with the loss of “passporting” financial services will require relevant front and back-office staff to relocate to the EU. However, even within each industry individual impacts and the appropriate response are highly variable. The differences will depend on things like the mix of goods and services the business sells, where it is based, where its customers are, and how complex its supply chain is.
Jessica Gladstone, Partner, Clifford Chance, says: “Failing to prepare is preparing to fail. Given the difficulty of knowing exactly what turbulence lies ahead many businesses are putting Brexit in the ‘too hard’ box. However, exporters that understand exactly what Brexit’s risks and rewards could be for them will be able to implement the right plans at the right time to ensure that they are one of the winners rather than one of the losers.”
Access the full report: The Red-Tape cost of Brexit
Source: Oliver Wyman
AFME, together with Clifford Chance, has today published guidance to assist bank clients in understanding how their cross-border relationships may be impacted by banks’ plans to adapt to Brexit.
The FAQs explain the potential significant impact on contractual relationships for financial services, providing answers to a number of “Frequently Asked Questions” which highlight potential operational and documentation impacts. As banks begin implementing their Brexit contingency plans, clients are likely to see impacts in respect of existing cross-border contracts and will be required to put in place arrangements for new business following Brexit.
The FAQs address questions such as which clients may be in scope, which contracts may be affected, how they may be impacted and consequential operational impacts that need to be considered.
Simon Lewis, Chief Executive of AFME said: “With the Brexit political process still ongoing, our FAQs document highlights the need for clients to take action now by reviewing documentation and operations to understand how they might be impacted, including whether operations may need to change. This is to ensure that clients have sufficient lead time to address documentation, technical and other issues for minimal business disruption. In this respect, AFME continues to call for clarity that clients will be able to rely on services under existing contracts post-Brexit.”
Monica Sah, Partner at Clifford Chance, said: “Six months ago nobody was talking about repapering. Now people realise that moving contracts from one jurisdiction to another is likely to be a significant undertaking as banks adapt to Brexit. These FAQs attempt to simplify a hugely complex process and help clients understand how their day to day contractual activities will be impacted by their dealers’ implementation of their own Brexit strategies. Clients need to work with their dealers to ensure a smooth transition and a continued seamless service.”
The FAQs primarily focus on questions relevant to EU27 clients of UK-based banks in relation to sales and trading in wholesale markets and related credit given for settlement purposes. The FAQs also highlight questions for UK-based clients of EU27-based banks, and primary market and financial market infrastructure impacts.
Twenty-four banks are already planning to expand their Frankfurt business ahead of the upcoming Brexit – but the actors cannot rest on their laurels, reminds CDU executive committee member Jens Spahn. Especially opposite Paris, Hesse and Berlin would have to exert themselves. There is still much to be done on the Main.
The Parliamentary State Secretary of the Federal Minister for Special Tasks, Jens Spahn, emphasized on Wednesday at an event of the Hessian CDU how important the further development of the Financial Centre Frankfurt is for the federal government in Berlin. Politicians must work even harder to maintain the metropolis’s leading position, he said. Spahn referred to Germany’s failed attempt to bring EU banking supervisor, EBA, from London to Frankfurt. Instead, Paris won the bid in November. In view of Brexit, and a possible resulting shift in euro clearing, Frankfurt must be more successful than EBA, said the 37-year-old, who was still working as State Secretary in the Federal Ministry of Finance until October.
In order to make the Financial Centre Frankfurt more attractive, some things must be done on site, he said, recalling housing construction and labor law adjustments, especially for investment bankers. In contrast to other EU member states, the Federal Government is still keen to maintain a close relationship with the British in the future. However, it is not yet clear which access to the financial market the British choose: London, like Singapore, could become a financial centre whose looser regulation attracts business or anchor itself to the rules of the EU area.
The phase of confrontation with the digitalization of the financial sector is over: Fintechs pivoted to cooperation with established actors – for which Spahn himself launched a number of initiatives and contributed to bringing the banks into dialogue with Fintechs. His motto: “Talking to each other is half the battle.” Speaking several times about the subject of blockchain, Spahn pointed out that the technology, which makes transactions comprehensible and without a central authority, allows him to see far-reaching changes possible. “Blockchain can make the business model of intermediaries completely superfluous.” Thanks to digital identity management, an investor can then also transfer money “to a light bulb in Malaysia,” said Spahn with a smile. He sees a need for action in the establishment of blockchain companies in Germany. Although a large number of software developers are at home in Berlin, the companies themselves (usually via foundation constructions) are at home in Switzerland – there is the so-called “Cryptovalley” in Zug.
After the Financial Centre event, Spahn made a stopover at the first Portfolio Day of the Deutsche Bundesbank. In his opinion, the German government is still at the beginning of sustainable finance. “Everything is still very timid in comparison to the demands and wishes,” he said. “With all our strength towards green finance is certainly not our motto.” In the recent exploratory coalition talks, Green Finance had been an issue, but in the economic not in the finance department. “However, it was just about a general commitment to it.”
Spahn pointed out three areas in which the federal government is already strengthening itself for sustainable investments: the fund for financing nuclear waste management, into which the nuclear power operators have paid around EUR 24 billion, is to be managed according to ESG criteria (environmental, social, governance). Secondly, sustainability is an issue for KfW, which is owned by the Federal Government and the Federal States: “In 2016,44% of KfW’s funding volume went to environmental and climate protection measures.” In addition, KfW is Germany’s largest and the world’s second largest issuer of green bonds and an important investor. Thirdly, during its G20 presidency, which just ended, Germany fought for a stronger focus on the issue of sustainable investment.
According to Spahn, public sponsors often have different ideas about what sustainability means. “There is certainly a consensus that there should be no investment in companies that rely on child labour. It’s more difficult when it comes to climate issues like nuclear power or coal.” He himself considers nuclear power to be an important bridge technology. “Should the question of how the state invests really be politicized?” He believes that market regulation is more important: the state must ensure transparency, for example. “That would be comparable to the electricity sector: only green electricity can call itself what green electricity is.”
Spahn also made it clear that for him, sustainable investment does not only consist of green capital investment and ESG criteria. This also included the security of the investment and financial market stability. “George W. Bush’s measures to promote home ownership were intended as a social measure, but ultimately contributed to the financial crisis.” Yield is also an important aspect. Spahn has long advocated a higher proportion of equities in federal funds such as the nursing care provision fund.
The Deutsches Aktieninstitut (DAI) presents its second position paper. The paper on the exit negotiations between the European Union and the United Kingdom complements the first position paper from February 2017 and covers further relevant topics, e.g. clearing, benchmark and rating. In the light of proceeding negotiations, the position paper claims to find transitional arrangements that prevent Europe from a Cliff Edge Scenario.
Under the slogan “Exit negotiations between the European Union and the United Kingdom: Minimise Brexit risks and strengthen the European capital market”, the analyses of financial and capital market legislation and concrete examples from practice, illustrate which topics deserve particular attention due to their significance for business and society in connection with the Brexit negotiations.
No deal is the worst deal for all parties affected
“The United Kingdom’s departure from the European Union will have considerable consequences for the European economy and society”, Dr. Christine Bortenschläger, Chief Executive of DAI mentions in the paper, “It is not yet possible to predict how those will look like in detail since the outcome of the ongoing negotiations between the United Kingdom and the European Union is still completely open. This means that companies are losing valuable time they need to adjust to the new situation.”
Risk and consequences of a hard Brexit can be reduced with transitional arrangements
The third country regimes in financial -and capital markets law won’t serve as a sufficient basis to regulate the relations between the 27 EU-states and the United Kingdom, as the second position paper shows. Therefore, the European Union needs a new and broad trading agreement that complements first transitional arrangements. “Transitional arrangements are of decisive importance to buy more negotiating time, enable businesses to prepare for the new situation, and avert a no-deal scenario”, is one of the first position paper sentences.
Renowned German trade associations today have published a digital, cross sectoral Brexit Compendium, with the aim of bundling the interests of the German economy. The position papers of participating trade associations on Brexit can be found on the respective website http://brexit-kompendium.de/en/, sorted by relevant topics.
The United Kingdom’s departure from the European Union will have far-reaching consequences on the European economy and society. In this regard, the concrete impact depends on the result of the Brexit negotiations.
The objective of the Brexit Compendium is to aggregate topic areas with high relevance for the economy in a reference work. To do so, the position papers of the participating trade associations have been pooled in one location. That way, political decision-makers and the interested public are provided with an easy access to problem analyses and solution proposals.
The trade associations contribute their specific topics and expertise to the project. They are independent in terms of content and stay responsible for their topics and publications.
The website of the Brexit compendium can be found here.