Bank of England tells financial firms to disclose plans for Brexit
The Bank of England (BoE) is instructing all regulated financial firms in the UK that do business within the European Union to set out their contingency plans for Brexit by July.
Sam Woods, the deputy governor for prudential regulation at the Prudential Regulation Authority (PRA) has written to all banks, insurers and investment companies that carry out cross-border activities between the United Kingdom and the rest of the EU.
That includes subsidiaries of US investment banks based in London doing business with the EU, as well as UK banks doing likewise and branches of companies from other EU states operating in London.
AIB said it had received the letter, but Bank of Ireland would not comment.
"We expect all firms with cross-border activities between the UK and the rest of the EU to undertake appropriate contingency planning for the UK's withdrawal from the EU, in light of the UK government's decision to trigger Article 50," the BoE said.
BoE Governor Mark Carney has set a deadline of July 14 for firms to reveal to the bank how they would cope with an abrupt EU exit.
The BoE said the main purpose of the letter was to ensure that all firms are making, and stand ready to roll out, contingency plans for the full range of possible scenarios "such that the safety and soundness of their UK operation is assured".
"Many firms are well advanced in their planning and have engaged closely with the PRA as part of that process," Mr Woods said.
"However, our current assessment is that the level of planning is uneven across firms," he said.
"Plans may not be sufficiently tested against the most adverse potential outcomes."
He added, "for example, if there is no withdrawal or trade agreement in place when the UK exits the EU, and the UK and EU do not reach agreement on issues such as implementation periods, mutual recognition of standards, and co-operation in financial regulation and or supervision". Ahead of the referendum last year the Central Bank of Ireland said banks here were ready for a Brexit, and Irish-based banks and finance firms with exposure to the UK have contingency plans in place to deal with the short-term fallout.
Deputy governor Sharon Donnery said the Central Bank had been engaging with financial sector firms to assess their preparedness for the risks associated with Brexit.
Meanwhile, Mr Carney called for Britain and the EU to reach a sweeping deal to recognise each others' bank rules after Brexit or risk a potentially damaging hit to financial services across Europe.
In a speech at Thomson Reuters' London office, Mr Carney also said that he would push to ensure some clearing of euro-denominated transactions remains in London after Britain leaves the European Union.