Thu. Sep 19th, 2019

Planet Compliance

Innovation & Regulation in Finance

Five Minutes to Midnight – What Boris Johnson’s No-Deal Brexit will mean for FinTech firms

5 min read

Key aspects for FinTech firms to consider when preparing for a potential no-deal Brexit, how to keep the boat afloat and how to stay compliant.

Boris Johnson is the new British Prime Minister. His promise to deliver Brexit and unite the country does mean nothing else than that he could be dragging the UK towards a no-deal exit and a political and financial crisis. While EU leaders were quick to make their statement that there will be no renegotiation of the existing proposal, the new UK government is certain to put the threat on a table and no one can say how the stand-off will play out.

Considering that there are plenty of other aspects regulators in the UK and in the rest of the EU have been focusing on, which keeps firms busy, with the recurring risk of a no-deal Brexit already imminent in discussion of previous UK governments with the EU, for many firms it means continue with their contingency plans. Nonetheless, these should be reviewed constantly and who has not had the chance or resources to do so, the following can be considered a starting point for a response to the latest developments in UK politics.

Here are a few key aspects:

Stay on top of liquidity

Make sure you manage liquidity well. This go sense for start-ups and smaller firms even in normal times, but in the Brexit environment with lots of uncertainty this is an important aspect that decides about the survival of a company as additional funds may be hard to come by in the current climate.

Customer Relationships

Communication is key, especially with regard to your customer relationships. Strong customer relationships are crucial in tough times and if they stick with you now, it will go a long way. Pay extra attention on aspects like product suitability, in particular as market conditions change.

Dialogue with Regulators

Communication is key, especially with the authorities that oversee your activities and that make the rules. The different national and EU regulators have dedicated information and services for everyone with an interest in Brexit. For FinTechs vital and for RegTechs a potential gold mine. For example, the UK’s FCA has outlined its role in preparing for Brexit; the German regulator BaFin has provided answers to FAQs; the Banque de France has focused on common challenges and answers beyond Brexit; and ESMA has published sector-specific principles on relocations  of entities, activities and functions from the United Kingdom. The regulator try to help as much as they can and it helps staying in touch with the authority that is responsible for the oversight of your activities even if they might not have all the answers themselves either.

Internal communications

Communication is key, so make sure you keep people informed. Make sure that all stakeholders, staff, investors, your clients or service providers get the information they need. This might be challenging times, but everyone knows it, so no need to sweep something under the carpet.

Long-term strategy

No one knows what the relationship between the EU and the United Kingdom will look like after Brexit, nor do we can predict exactly it’s consequences for the FinTech sector, so it’s too early to draw the curtain on London and the UK. Having said that, if your product or service is heavily reliant on access to markets in the European Union, it might be worth considering your options if you haven’t done so already. If the UK doesn’t manage to retain access to the EU single market, could you relocate to another FinTech hub and what would the consequences be? No need to panic, but always hope for the best and be prepared for the worst.

Regulatory Change Management

EU legislation continues to be applicable. Either directly or through its implementation into national law until the ties are really separated, so keep working on compliance with existing regulation and prepare for upcoming rules. Despite the ongoing limbo new regulations like the Prospectus Regulation that has just become applicable will need to be addressed by firms in the UK and all other member states of the European Union.

In any case, don’t loose your head and…

 

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