How does the post-Brexit financial services deal affect debt and asset recovery?

The HM Treasury is urging the EU to work more collaboratively with the UK government, to finalise the post-Brexit deal for financial services. The Christmas Eve deal did not cover this important area and both sides have been seeking access to the others markets ever since.

However meetings held since have seen the in-principle Memorandum of Understanding agreed, which outlines how the UK and EU financial services regulators should work together going forwards. But, this is yet to be signed off by the 27 EU member states.

Without the memorandum agreed, it is difficult to know how to proceed. With the memorandum signed off, both the UK and EU will have a more transparent, understandable routine in terms of engagement and how they share information.

The two sides have been discussing equivalence, but issues have developed since the inception of the overall discussion and now, the general opinion is that “you can’t have divergence and equivalence” (Mairead McGuinness, EU Financial Services Chief).

In my opinion, there needs to be more of a discussion but it is a start. Both sides need access to the other markets. Many EU banks work in the UK and the UK is a buoyant market for consumer lending, and outside the US is the most complex consumer credit market with many built in consumer protections.

So how will this affect banks making recoveries in the UK? The first thought that springs to mind is time, and whether the fact the memorandum still isn’t signed off fully will cause delays. With both parties currently unsure on the exact protocol for recoveries without this agreement, there could be push-backs in terms of achieving recoveries.

That said we as a team have seen an increase in the need for advice from our clients in Germany, Belgium, Sweden and France. Whereas before these clients would have proceeded along lines of basic EU law, they are now very concerned that any action taken may affect their interim permissions under FCA requirements. Furthermore how do they deal with both consumer and commercial customers in the UK post brexit. Whilst initially this appears to be a crisis in financial services, this represents an opportunity for our team to assist our European friends and clients within this jurisdiction as divergence becomes embedded.