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FCA data reveals 5,500 UK Companies ‎make use of passporting rules

Brexit continues to be omnipresent. From British Airways’ Business Life (September 2016 p. 11-12, “Post Brexit, Brand Britain must show its mettle… and its sense of humour”) to the Spectator, articles are a mixed cocktail of seeing Britain great again to worries about what’s next. It really depends on the lens through which you are looking.

Theresa May’s recent meeting with Wall Street nobility has left no doubts about expectations. The message was clear: we prefer access to the single market, but if that proves impossible then the transition period will have to be longer (possibly five years).

The data released by the FCA to the Parliamentary Treasury Committee shows that close to 5,500 UK registered companies make use of the passporting rules to access the European Single market. On the other hand 8,000 firms registered across the 27 EU countries use this route to access the UK.

Of course, access to the single market is the single biggest issue for companies operating from the UK. Some are among the biggest in the industry. The FCA data highlighted that many countries outside the UK have a lot to lose as well.

Deutsche Bank, Commerzbank, BNP Paribas and Société Générale run large branches in the UK. Even bigger is the impact on the insurance business with AIG and Tokyo Marine two of the most prominent names.

Clearly in times where profit margins are being squeezed, no banker has any appetite to place further burden on profitability. In other words, the extra Brexit burden is simply inconvenient.

Creativity is in high demand. Bankers, lawyers and advisers will work on solutions over the months to come. Passporting is an efficient and proven mechanism. Alternative solutions are less likely to provide better customer outcomes. Higher cost and decreasing efficiency are also less likely to lead to increased shareholder value.

The conundrum remains: access to the single market versus free movement of people. It is highly unlikely the UK will sacrifice one of the key demands of the Brexit supporters – better immigration control. EU membership seemed to have defined by this perceived evil. Access to the single market will come at a high price, as both sides will strengthening their bargaining positions in the coming months.

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Brexit: opportunities for smaller overseas banks

Rudi Lang

Global Financial Institutions Group Leader

Rudi leads Mazars’ Global Financial Institutions Group and is the Head of Mazars’ Global Monitoring Trustee Services. He has over 20 years’ experience within the financial services industry, working with Mazars’ largest clients, European regulators and public authorities. His experience includes the co-ordination of complex, cross border regulatory projects, large scale projects around European restructuring and special risk management assignments for international banking clients. He has been engaged in Prudential Capital Assessment Reviews and Asset Quality Reviews for a number of European banks and acts as a skilled person for regulators in the UK and across Europe. Rudi is also currently the Monitoring Trustee of some of the most prominent state aid cases in Europe. Rudi is committed to driving industry best practice and to that end has been part of the ICAEW working party formed to examine the dialogue between bank auditors and audit committees. He is a German...

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