Tuesday 21 November 2017

Challenges posed by Brexit could undermine global financial stability - IMF warns

International Monetary Fund (IMF). Getty Images/Gallo Images
International Monetary Fund (IMF). Getty Images/Gallo Images
Colm Kelpie

Colm Kelpie

The challenges posed by Brexit could undermine global financial stability, the International Monetary Fund (IMF) has warned.

Financial firms’ ability to operate across jurisdictions will be curtailed, with banking set to be the hardest hit by the loss of passporting rights, the Washington-based body said.

It argued that the complexity of financial entities is likely to increase after the United Kingdom leaves the European Union, posing new challenges and costs for national supervisors and regulators.

“The challenges stemming from Brexit could undermine financial stability in ways that are difficult to estimate or predict at this juncture,” the IMF noted, in its latest global financial stability report, published today. 

It warned that many core areas of banking, including mortgages, cross-border banking, and deposit taking rely on financial passports and that without them, banks will need to shift operations out of the UK.

That means banks are preparing for worst case scenarios, and that while duplication of some services across jurisdictions is inevitable, costs for firms will increase, the IMF reported stated.

But it added benefits could also arise from a less concentrated banking system throughout Europe.

It comes as the stock index of the UK’s biggest 100 companies has lost all of its 2017 gains as the strengthening pound weighed on the earnings of the mostly foreign owned firms.

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