1. The Future of the Finance Sector: Brexit and Beyond
Association for Financial Markets in Europe
The Future of the Finance Sector:
Brexit and Beyond
Simon Lewis, CEO, AFME
19 April 2018

2. AFME: Overview Who we are Association for Financial Markets in Europe
The Pan-European trade group representing European capital markets participants
A bridge between the European wholesale banking community, politicians, regulators and the public
Over 160 members including retail & investment banks, regional banks, investors and market participants such as law firms and consultants
Based in London with offices in Brussels and Frankfurt

3. Brexit: timeline UK formally leaves EU; transition period begins
European Council Summit – to conclude withdrawal agreement
EU (Withdrawal) Bill Royal Assent
End of transition period
Informal deadline for negotiations to allow time for ratification
Ratification process – UK and European parliament and institutions
Negotiations on future relationship and ratification
European Council approves guidelines for future relationship
New EU Commission and Parliament
23 Mar
Oct
Nov
Jun
Apr 19 – Dec 20
Jun(TBC)
18-19 Oct
29 Mar
31 Dec
2018
2019
2020

4. Brexit – Key issues for financial services
1. Impact of leaving the single market
Large volume of financial services provided from UK to the EU27
Banks face significant uncertainty and have undertaken extensive planning to adapt to the loss of passporting
Banks are now implementing plans to enable them to continue to serve their clients across Europe e.g. getting licenses in Frankfurt
2. Importance of transition
A transition period is essential to provide time for banks to adapt and to avoid a cliff edge
Key question is to what extent the political agreement on transition is legally certain.

5. Brexit: Key issues for financial services
3. Avoiding cliff edge risks
Need to ensure that existing regulated contracts can continue to be performed after the UK leaves the EU
Need to enable personal data to be transferred between the UK and EU
Uninterrupted access to financial markets infrastructure e.g. clearing houses
4. Likely impact on jobs and growth
Possibility of increased fragmentation of capital markets; potential impact on ability of markets to support jobs and growth e.g. availability of finance to SMEs.

6. Impact on the red economy
AFME commissioned a report on the impact of Brexit on SMEs, in particular their use of wholesale banking and Capital Markets services.
We held 70+ interviews with treasurers and CEOs of SMEs, large corporates and investors.
Overwhelming majority of interviewees wanted Brexit negotiators to maintain existing levels of access for businesses to both UK and EU27 financial services firms

7. SME perspective
SMEs most concerned about direct Brexit impacts, such as trade barriers, customs compliance, diverging regulatory regimes
44% do not expect effects of a hard Brexit on the banking sector to flow through to them; 33% fear they will be first segment hit by adverse impacts; 22% were unsure
SMEs are most worried about adverse impacts to their access to wholesale banking services. Key concerns
~60% of SME interviewees use only 1 bank – and find switching difficult
Brexit–related price increases for risk management products
Product
Financing operations
Financing capital expenditure
Managing risk
Managing cash
"SMEs are first in the firing line [when there is a credit squeeze]" – UK SME
"Switching banks would not be easy; This would be something new for us and we would find the process difficult" – EU27 SME

8. Importance of other key pan-European initiatives
Banking Union
Banking union was designed post-crisis to create a safer financial sector for the Eurozone
Pan-European banks are now supervised by the ECB
Further measures on common deposit insurance are under discussion
Capital Markets Union
Capital Markets Union aims to integrate further the capital markets of EU member states, to:
provide new sources of funding for businesses, especially for SMEs
reduce the cost of raising capital
increase options for savers across the EU
make the EU financial system more stable, resilient and competitive
The case for a CMU is more compelling than ever

9. Summary There are multiple milestones in the Brexit timeline
Agreement on transition is a major step forward but there is continued uncertainty
The timeline is very tight
The future UK-EU trading relationship still needs to be negotiated
Important EU initiatives including Banking Union and CMU are needed beyond Brexit to support continued European growth