Brexit: Significant Opportunities For A Regulatory Reboot

The article first appeared in Banking Perspectives, the quarterly journal of The Clearing House.

The UKs vote to leave the European Union has triggered a change in the political climate and in the way banks and financial markets participants are likely to be regulated in the region. The newfound fondness for the financial sector among political decision-makers is unlikely to presage a return to regulatory arbitrage, which has long been blamed as a cause of the credit crisis. However, the situation presents considerable opportunities for improving the regulatory framework for the sector as a whole.

On Brexit, there is a well-known need for an agreement to be struck between the U.K. and EU on passporting – that is, the facility for financial institutions to provide cross-border services to customers in EU countries – or for some suitable replacement. We discuss the likely shape of such an agreement and its implications below. However, the more important point is