Brexit is delivering a wave of change for UK-based finance institutions: for many, it’s move certain functions or risk detrimental losses. Brexit’s impact on business, particularly financial services companies, is huge. And migrating parts of a UK business to a non-UK legal entity is an enormous challenge of unprecedented scale that requires multiple steps, directly impacting people, processes, systems and functions.

How to Prepare for Impending Change

Since the ratification of Article 50, the withdrawal process has begun, with a supposedly fixed timeline ending on March 29th 2019. The impact of Brexit on financial services companies is still a bit nebulous, but banks are preparing the best they can. As negotiations move forward, many banks are finishing the relocation of parts of their activities and staff from the UK to the EU27. Here are some of the impacts of Brexit on business:

  • Most banks have contingency plans to relocate in the event of the UK exiting the EU without a deal for financial services.
  • A ‘hard’ Brexit scenario represents the default – and most logical – planning assumption for all FS organisations operating in the UK.
  • The overall impact of Brexit on financial services: Firms are moving some operations, including trading and back office functions to cities in the Eu27 like Frankfurt, Dublin and Paris, but there has been no evidence of banks (or other FS institutions) uprooting and leaving the UK completely.
  • All good quality applications (by banks to the European Banking Authority) to move operations had to be in place by the end of Q2 2018. This still does not guarantee a financial institution will be operational on or after 29 March 2019. There is a real risk of an ‘approval backlog’ here due to the volume of applications made.

Moving applications to prepare for Brexit involves a range of complex challenges ranging from sourcing office space, to maintaining market infrastructure access, to physically moving people into roles within the new host country.

Obviously, the scale of this transitional challenge varies between organisations, depending on the operating models and architectures currently maintained in the UK and EU, respectively. Constraints influencing this Brexit-related business challenge include:

  • Client service
  • Data reconciliation
  • Deployment and integration of multi-entity virtual platforms
  • Mitigation of operational risk
  • Functional changes
  • Data security challenges

The Approval Backlog

To prepare for Brexit, all good quality applications (by banks to the European Banking Authority) to move operations had to be in place by the end of Q2 2018.

A ‘good quality’ application would be a complete file generated in line with the SSM Framework Regulation requirements. The information required to authorize credit institutions has been further specified by the European Banking Authority in draft regulatory technical standards (which were published on 14 July 2017). Detailed requirements can be found in the SSM Framework Regulation and regulatory technical standards.

For banks that failed to meet the Q2 2018 target date, or failed to submit high-quality applications, they will not be authorised by the end of March 2019. Without authorisation, and in the event that no transition period is agreed, all activities that would require a license to be carried out in the euro area would be disrupted after the United Kingdom has left the EU. Brexit has a massive impact on business as a result.

Partnering with Excelian

How do you prepare for Brexit? Contact us at Excelian; we can help.

Excelian has a proven approach to large-scale financial services migrations and post-migration support across business and technology, both inter-entity and across country jurisdictions – perfect for Brexit’s effect on business.

Our capabilities in data management, system infrastructure, platforms integration, functional and automation testing, trade and transactional reporting can be readily deployed and scaled to prepare for a “deal” or “no deal” brexit. While licensing applications must be done under ECB / national supervision, at Excelian we have experience and can support firms in business processes segregation and making steps towards the target operating model.

We have a proven track record in many migration-related assignments, including Brexit business projects delivered by our teams this year to tier-1 investment banks, in particular:

  • Client’s accounts migration from numerous legacy systems to the new booking centre in Europe
  • Trading entity migration from London to Zurich
  • Business processes segregation between entities aiming to align with EU/UK regulatory requirements and meeting the target operating model

Our teams have the required knowledge and expertise in addressing key Brexit challenges and are ready to deploy at any scale and phase. Contact us here.
Olga Ovinnikova
Olga is a Service Delivery Manager at Excelian – a change management professional with extensive functional & operational migration experience. She is responsible for establishing an off-shore program management office for the Excelian customers as part of delivering company’s workforce and location strategy. She led the engagement with a Tier-1 bank to hire & train the team of over 40 staff to support the bank's complex change portfolio. This involved defining & implementing the operating model, optimizing and standardizing processes, including a PMP-aligned service catalogue.