Michael Cole-Fontayn, the European chair of US bank BNY Mellon, has said that major banks are preparing plans for a worst-case Brexit scenario.
Cole-Fontayn warned that the scenario in question, a deal that didn’t account for or include financial services, could well send the country into another financial crisis.
Cole-Fontayn told Business Insider:
Because nobody knows what the outcome of the negotiations is going to be, the industry has to plan for the most challenging scenario. For the UK, this is considered to exclude membership of the single market, with no deal for financial services; at least in the early stages. Planning for this scenario is a sensible course of action, and is what our regulators and our clients expect us to be doing.
The planning is logical; while neither negotiating party wants to come out of those discussions without a deal, the banks need the security of having a plan in place should worst come to worst.
If financial institutions can’t rely on the continuing validity of contracts, and basic services such as insurance, the UK banking market is in trouble.
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The institutions aren’t without cause for concern either, prime minster Theresa May has previously said that she would rather take a deal off the table entirely rather than take one that was considered bad for Britain.
In an interview just this Sunday, Brexit minister David Davis reinforced the sentiment, saying that Britain would be prepared to walk away from negotiations with no deal.
On the part of those banks, Cole-Fontayn raised similar concerns as in other industries.
Although the broad worry is the risk of financial crash, the smaller parts that build up to that relate in general to stability.
Given that we are still, in many ways, recovering from the last crash, he emphasised that the ability of banks to maintain consistency in their operations should be considered vital to negotiations.
It’s certainly our hope and belief that regulators will be able to continue coordinating, communicating and sharing information. It’s our plea that the politics will allow for that – we hope that is the case, but we can’t know for sure until the negotiations are complete. This is why The Bank of England is making sure we all have contingency plans that don’t assume any regulatory cooperation. Safety and resiliency of the financial system is absolutely vital.