The EU’s capital markets and banking union post-Brexit

Luis de Guindos, the Vice-President of the European Central Bank. He gave an overview of why the implications of Brexit on the financial markets, especially the capital markets, are so important for the euro area and eurozone: many clearing houses, in the context of wide cross-border market access, are based in the UK; it is also an important location for euro area bilateral OTC derivatives markets; the UK plays a role in liquidity for the euro area; and many advisory and other financial services are provided by UK firms for securities issuance, M&A, and syndicated lending in the eurozone. Furthermore, half of debt and equity issuances come through the UK. There was also an explanation of the importance for the UK: financial and non-financial companies may leave the UK because certain bank lending and deposit taking activities are not covered by third country regimes.

De Guindos did not purport to know which way the wind would blow for the future relationship, but did caution against a regulatory race to the bottom between the EU and the UK. He discussed ways forward, such as EMIR II and requirements for third party clearing counterparties, and harmonisation and ‘Europeanisation’ of rules for a more integrated EU capital market, and then rounded off by offering up priorities for the banking union.