Will the UK Financial Services Industry be Affected by Brexit?

UK Financial Services

The UK has for many decades been a financial services hub within Europe and the World, with large financial services companies being head quartered in the UK or operating their EMEA or European operations in the City of London.  With the potential exit from the European Union (EU), many customers of these large financial institutions will be concerned whether their products and services will still be valid following Brexit.

At the present time any financial services organization authorized to operate in any European Economic Area (EEA) country can conduct business in the country they are registered, and any other EEA state as long as they open a branch in that country, appoint an agent in that EEA state, or provide cross-border services.  This allowance of the EU is a vital part of the EU agreement aiding businesses within the region to compete freely across all markets. His is called ‘passporting’ and can be used to provide banking, insurance and other financial services to EU consumers.

Should there be a no deal Brexit the provision of these cross border passporting financial services will cease for UK based financial services firms.  This will particularly affect medium and small sized companies who have made use of the passporting scheme and don’t have separate European entities set up.

For the larger banks such as Barclays, NatWest and RBS the change in the UK’s European status won’t affect their ability to continue to provide financial services for customers in non UK European countries.  Barclays has a subsidiary called Barclays Bank Ireland (BBI) which can operate and will continue to operate freely within the EEA as long as Ireland remains in the EU. RBS is part of a larger group which operates under other entities and brands throughout Europe, and while UK customers are used to the RBS brand, the Brexit no deal scenario will see EU customers continue with or switched to the Netherlands subsidiary NatWest Markets N.V using the Netherlands passporting rights to serve the whole of the EEA.

However the question still left fully unanswered is how Brexit will affect UK-citizens living in other EU countries who have financial services products and services with UK-based companies.  It is yet to be confirmed by many of the financial services organizations whether the products and services provide will cease or will be transferred to an EU-based subsidiary.

In regard to insurance products, products bought in the UK to cover a UK-based risk such as home or car insurance will not be affected by Brexit, but UK insurance companies like Banks will need to have a EU subsidiary to continue to provide insurance products to customers in EEA countries after the Uk’s exit from the EU.

Travel insurance will be unaffected as long as a UK citizen bought a travel insurance policy from a UK insurance company.  However, claims on travel insurance due to delays due to Brexit may be problematic, and health and medical cover claims through travel insurance policies will increase due to the end of the UK’s involvement in the European Health Insurance Card (EHIC) policy, which may mean an increase in travel insurance costs within Europe.

Overseas property insurance for UK residents with holiday homes in Europe may have concerns over their coverage post Brexit.  However some providers such as Intasure have arrangements with insurance providers in the European Union to provide coverage which will continue after Brexit with full cover for the remainder of the policy and any renewals.

If you have concerns about your financial services products the first and best stop is your financial services provider, ask them what will happen to your product or policy following Brexit, and inform them of any changes to your residency location as soon as possible to ensure continuity of service.

Sources:

https://home.barclays/who-we-are/our-strategy/preparing-for-brexit/

https://personal.rbs.co.uk/personal/support-centre/brexit-hub.html

https://www.aviva.co.uk/aviva-edit/your-future-articles/brexit-and-your-policies/

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