Here’s Something Theresa May Probably Didn’t Think About Before Cancelling Today’s Brexit Vote

Will no one think of the clearinghouses?
Author:
Updated:
Original:
By EU2017EE Estonian Presidency (Theresa May) [CC BY 2.0], via Wikimedia Commons

By EU2017EE Estonian Presidency (Theresa May) [CC BY 2.0], via Wikimedia Commons

The U.K. will either leave the European Union or not on precisely March 29. This may seem like plenty of time; lots of members of the British Parliament, for instance, think three-and-a-half months is more than sufficient to produce the miracle that the last two-and-a-half years have failed to. Unfortunately, others—banks, for instance—don’t have quite that much time. In fact, in one crucial area, they don’t have any time left at all.

Contracts are often subject to a 90-day notice period. Counting back from Britain’s exit date of March 29 and allowing for the holiday period, the industry needs to make real decisions now.

Most vulnerable is a central piece of financial infrastructure known as clearing. London is the dominant city for this activity, but the London institutions that perform this task won’t be allowed to do it for banks and investors in continental Europe if the U.K. and the EU don’t agree on some kind of continuing relationship by March 29…. One trade body, the Association of Financial Markets in Europe, has estimated that EU banks might have to post up to €40 billion ($45.5 billion) in extra margin payments in Europe and hold up to €1 billion in extra capital.

Unfortunately, Prime Minister Theresa May feels no such time pressure, providing further evidence of the City’s continuing political irrelevance.

Theresa May has postponed the final vote on her Brexit deal after a last-minute conference call with cabinet ministers, a clear admission by the prime minister that she does not believe she can get the unpopular EU withdrawal agreement through the Commons….

The vote could take place next week or even be delayed until early January, although this would allow less time for the ensuing Brexit legislation to be passed through parliament before 29 March. The ultimate deadline for the vote is 21 January.

Global Finance Needs to Make Brexit Decisions Now [WSJ]
Theresa May postpones Brexit deal vote [Guardian]

Related