Brexit

Deutsches Aktieninstitut – Brexit: it is five to twelve!

Deutsches Aktieninstitut calls upon the European and British negotiating parties to finally place their trade relations on a new sustainable basis. In its third position paper on the Brexit negotiations Deutsches Aktieninstitut shows using as examples tariffs and product approval as well as derivatives and data protection that companies cannot solve all the problems arising due to Brexit on their own.

The position paper can be downloaded here.

Brexit

The risk of a hard Brexit puts businesses in a tight spot – stormy autumn is approaching

Companies on both sides of the channel are hoping for clarity on the impact of Brexit on their businesses by the EU summit in October, and no later than the possible EU special summit in November. To what extent the autumn will bring a transition agreement setting the status quo until the end of December 2020, remains unclear. Although this transitional period is foreseen in principle, it is highly dependent on conditions that remain unfulfilled which pose considerable obstacles. This is especially true for the Irish border issue.

Whether there will soon be clarity is still uncertain. From September onwards, the management of Frankfurt Main Finance expects a stormy autumn. Banks will have to make important decisions about their set-up over the next few weeks, as the time to prepare for Brexit at the end of March 2019 will otherwise be too tight. Just a few months before the UK’s exit from the European Union, the risk of a relatively hard Brexit has not been averted. This brings trade, industry and financial services alike under time pressure and pressure to move.

In the coming weeks, financial institutions expect not only increased inquiries from their customers, but also to decide for themselves which of the scenarios they are preparing for. “Time is running out,” says Hubertus Väth, Managing Director of Frankfurt Main Finance. “We’re expecting a stormy autumn: industrial and trade companies, as well as the asset management industry, must now seek to make the necessary arrangements with their financial services providers. It is important to Brexit-proof their financing and investments. That does not work at the touch of a button. We’re heading for a mass start which will lead to a bottleneck for those late to the line.”

Therefore, Frankfurt Main Finance advises companies from trade and industry as well as asset managers to actively pursue dialogue with their financial services providers to Brexit-proof their financing. This applies in particular to the clearing for euro-denominated interest rate derivatives. “Companies must take initiative themselves and approach the banks,” says Väth. “It is in their own interest, for example, to hedge their financing and hedge their interest rate risks even for a hard Brexit. Unfortunately, this case can still not be ruled out. The sooner they talk to their banks, the better the preparation will be, because companies will be the main victims in any case of doubt.”

Frankfurt Main Finance sees the Financial Centre Frankfurt as the logical first choice in the reorganization and orientation of the financial sector after Brexit. However, to make use of these opportunities under increasingly intense international competition requires further substantial effort.

Euro-Clearing after Brexit – Hubertus Väth in BBC Radio 4 Interview

The Economic and Monetary Affairs Committee of the European Parliament just released a statement on the future regulation of Central Counter Parties (CCP). The euro clearing by CCPs is an important part of the financial architecture of the European Union following Brexit. At the moment, the majority of transactions is handled by a London-based company. Currently, it is up for debate whether this will continue to be the case. In an interview with Dominic O’Connell on BBC Radio 4 Hubertus Väth, Managing Director of Frankfurt Main Finance, discusses the recent ECON statement, which is an indicator for how the EU might eventually decide.

While it is not certain what the consequences of Brexit will be for the financial centre London, it can be assumed that euro denominated interest swaps will be under heightened supervision by the European Securities and Markets Authority (ESMA) and the European Central Bank. Second to London Frankfurt is the most important centre for euro clearing and generally, having more than one euro clearing institution is of importance as it allows for more stability in times of a crisis. While a relocation might have some economic impact, research conducted by asset managers found that a relocation promises to be beneficial to pensions.

Listen to the full interview!