Since the referendum in the United Kingdom resulted in voters deciding to leave the European Union, “Brexit” became a long stretched-out path to “independence” that left many uncertain about financial services. Brexit has taken years to finalize and it even involved a rotation of multiple prime ministers to get it done.
Fortunately, the UK has seemed to carve out a Brexit deal with the European Union where most of the trade between the two economic blocks are free from tariffs and or limitations. There is however one compromise, and this relates to finances.
According to Milton Ezrati from Forbes Magazine, “the deal does not, as London had wanted, give British finance the free access to members of the EU it had when Britain was a member.” This led to operations and jobs being split between the two trading blocks and also the flow of money.
The Impact on Financial Services So Far
Policy and Restrictions
The Bank of England (BoE) has already expressed concern that the European Union wants to stipulate the overall adoption of EU Financial Services Rules in order to maintain the access to its market. This has led to policy and operational uncertainty.
The Insurance Journal reports that the BoE Governor Andrew Bailey stated that “I strongly recommend that we don’t become a rule-taker. If the price of that is no equivalence… then I am afraid that will follow.”
This was in response to the drop in trade volumes in early January 2021 as the UK left the EU. On a cautiously optimistic front, there does seem to be less disruption than was previously predicted with only about 5000-7000 jobs leaving London for the EU thus far.
Consumer Banking – Compliance
According to OÇonnor Coaches, The Irish Republic’s Central Bank has already started engaging with payment service providers to “emphasize the mandatory requirements for additional information and to monitor progress towards compliance.” This normally includes giving the address of the client.
They urged consumers that make use of UK Financial Service Providers to contact them to ensure they remain compliant to mitigate possible disruption of services. The Central Bank has confirmed that they are working on minimizing any disruption and will continue to monitor the situation closely.
UK Bank HSBC has however taken the approach to educate their customers on the impact of Brexit on their everyday banking. If anyone would like to know more, this page provides a good reputable source to help clarify the often confusing array of information consumers need to process.
Unfortunately, many UK residents living in Europe have not been met with favorable policies. According to Danielle Richardson from Which.co.uk, “an increasing number of British citizens living in EU countries are being told their UK bank accounts will be closed after the Brexit withdrawal period ends on December 31, 2020.”
Fortunately, Yahoo Finance reports that EU countries like Italy have however given UK banks a grace period that will allow them to adapt their operations accordingly. This deadline will expire on June 30, 2021.
The Increased Need to Possibly Use an Intermediary Bank for International Transfers
One component of Brexit that may affect consumers is the cost associated with money transfers between the UK and EU. Some remitting banks do not have a direct relationship with the receiving bank in that particular region (like the EU) and would need to use what is termed an Intermediary Bank.
Fortunately, Moneytransfercomparison.com has compiled an insightful article that lays out what anyone can do to avoid costly cross-border money transfers with intermediary banks (which can be up to five banks for one transfer in some cases) to save them money.
Here they not only explain the remittance process on a consumer level when money is sent across borders, but it also gives a great list of good considerations to consider avoiding these costly transactions. This at least allows consumers caught in the Brexit process to adapt if there are changes that affect them.
Crypto Currency Providers See Potential
Despite the UK building itself as a leader in the Financial Services Sector while being part of the EU, there are now some that argue that it is ready to enter the cryptocurrency realm as a result of its new found freedom to write its own policy framework.
According to Billy Bambrough from Forbes Magazine, “cryptocurrency developers want to help London’s financial center evolve to serve a decentralized finance (DeFi) future.” They argue that London has all the right skills already to make this a reality.
With many traditional banks either curtailing or cancelling their services with UK and or EU customers as a result of Brexit, this means that there is a gap in the market for anyone that is willing to facilitate money transfers between the UK and the EU.
One option according to Transferwise is a multi-currency account they offer to manage all cross-border money transfers. They argue that you will be able to “hold dozens of different currencies and get your own UK bank account details to receive fee-free payments in pounds.”
It furthermore explains that “you can also count on zero foreign transaction fees with the linked Mastercard debit card and free ATM withdrawals worldwide (up to £200 per month).” It allows consumers on either side of the English Channel to still maintain their existing banking presence.
What solutions like Transferwise solve is the ability to move money between countries and currencies without the limitations set by traditional banks and or regulatory bodies, which is good news for consumers and businesses.