4 minute read 11 Sep 2019
Brexit: Preparing for a no-deal scenario

How to prepare for a no-deal Brexit scenario

By

EY FS Insights

Minds Made for Financial Services

4 minute read 11 Sep 2019

A no-deal scenario on 31 October remains a credible outcome. 

Firms should continue to prepare on this basis and prioritize critical remaining actions over the next 50 days. In anticipation of the original Brexit deadline of 29 March, EY teams have published a number of key considerations for Financial Services firms for preparing on a no-deal Brexit scenario basis.

Given firms have made further progress with their Brexit implementation programmes, EY teams have reviewed and updated the no-deal considerations ahead of the potential no-deal exit date of 31 October.

Key considerations for your business: 

Business structure & governance

  • Do you have clear criteria for making a go/no-go decision on your no-deal contingency plan and have you verified that your processes will operate as expected in a no-deal scenario via a dress rehearsal and testing?
  • What governance has been put in place to understand and agree the risks being transferred as part of the business migration?

Business viability

  • Have you assessed the potential impacts of market volatility and economic uncertainty to business sectors, your clients, financial products and services and thus your business model and strategies?
  • Given the political uncertainty, do you have appropriate liquidity plans in place, in all relevant currencies, and have you built appropriate stress scenarios into your Internal Capital Adequacy Assessment Process and Internal Liquidity Adequacy Assessment Process?

Client migration

  • When will you execute contingency plans for those clients that may not be migrated to your new EU27 location in time?
  • Have you evaluated your front office control framework to mitigate the risk of unauthorized or unregulated trades on Day 1 of Brexit?
  • Have temporary and permanent permissions regimes been understood and evaluated with regards to their impact on cross border control frameworks, booking models and contract continuity, at both EU and each relevant country level, and appropriate controls implemented? 

Conduct

  • Have you ensured continuity of client services in the event of no-deal, including speed and level of access to their investments?  
  • Will clients be provided the same level of client asset protection that they previously had?
  • What controls have been put in place to counteract the increased risk of financial crime and market abuse during the transfer of business to the new entity? 

Data adequacy

  • Have you identified contracts that require model clauses, and lined up business pre-approval?
  • Have you assessed the impact of revised data architecture and processing on EU data subjects?

Financial Market Infrastructure (FMI)

  • Have you secured all the relevant FMI and central counterparties (CCP) memberships in the UK and EU27, considering the cross-jurisdiction market access issues?
  • Have you tested your front-to-back connectivity to the relevant FMIs, CCPs, and central securities depositories (CSDs)?

Operational resilience

  • Have you established and documented a global strategy framework around operational resilience including identifying and mapping global business services and dependencies?
  • Are you confident that your crisis and continuity plans are adequate to cater for potential no-deal disruption, and have you tested them with senior leader participation simulating across scenarios to determine impact tolerances?
  • Do you have assurance that all service provider (outsource and intra-group) contracts are robust enough for a no-deal scenario?

People considerations

  • Are you aware of the restrictions that will apply to your short-term business travellers to each relevant country in the EU from the UK? 
  • Are your systems, policies and processes robust enough to identify & manage a commuter population to ensure tax, social security, regulatory & compliance risks are managed / mitigated?  
  • Are you confident your workforce planning strategy provides current / future regional staff the support and skills required to successfully execute on a regional office build out and have the knowledge to operate under a new regulatory environment? 

Supervisory Dialogue

  • Have you prepared the appropriate communications to inform your supervisory authority of risks to the successful execution of your no-deal Brexit preparations?
  • Are you going to be able to handle increased volume of regulatory queries considering they have stated an increased vigilance in the event of a no-deal Brexit?

Tax

  • Have you assessed your potential UK exit tax exposure by reference to tax, transfer pricing and valuation principles?
  • Have you got documentation in place to mitigate risk?
  • Have you socialised identified issues with tax authorities?

Summary

Five questions to check you are No-Deal ready

About this article

By

EY FS Insights

Minds Made for Financial Services