Brexit. Did this really happen?
What many Europeans hoped would not happen, became reality. Yesterday’s vote is not only a sad day for Europe but also a decision with huge impact on and consequences for the European (financial) market. The Brexit brings up a number of questions related to the process of such “british exit” and its effects on European businesses.
What are the consequences?
One question, which has been discussed particularly nervous in the social networks this morning, is the impacts of the Brexit on the UK financial sector and its financial institutions. Will British institutions be able to passport their FCA licenses into the member states of the European Union or will the latter no longer recognize FCA licenses? What are the consequences of this? Will UK institutions have to obtain a license, for instance in Germany or Luxembourg, to be able to further operate their businesses in the EU? Will London lose its leading position as FinTech hub to Paris, Luxembourg or Berlin?
Well, we don’t know that – yet!
What are the next steps?
However, let’s take one step back. For the time being, there is no need for alarmism. The vote for the “Brexit” itself has no immediate effect on Great Britain’s EU membership and it’s contractual relationships with other EU members.
What will happen now, in a nutshell, is the following: First, the UK will officially inform the European Council of its decision to leave the EU. Secondly, the exit process as set out in Article 50 of the Treaty of Lisbon will be initiated:
• The European Commission (excluding Great Britain) will prepare guidelines for the negotiation of the exit of the UK;
• Based on these guidelines, the European Counsel or another body appointed by the EU member states will negotiate a “Brexit Agreement” with Great Britain;
• After such Brexit Agreement has been negotiated it needs to be approved by a qualified majority of the EU member states (again: excluding Britain) and the EU Parliament;
• Only after this agreement enters into effect, Great Britain will cease to be a member of the EU and only then the Brexit will have an effect on the contractual relationship between Great Britain and the EU – including the recognition of FCA licenses in EU member states.
However, should the EU member states and Great Britain not agree on a Brexit Agreement within two years after Great Britan notifying the EU of its decision to leave the EU, Great Britain will automatically cease to be a member of the EU. The European Counsel may, however, unanimously agree on an extension of this deadline.
To sum up: For the time being, nothing will change until the Brexit Agreement is concluded, or the two year period has expired. I consider it rather unlikely that the EU and Great Britain will risk an uncontrolled Brexit due the two year deadline. There will most likely be a Brexit Agreement between the EU and Great Britain. The results of the negotiations are yet to be seen.
For the time being “keep calm” and let’s hope that other EU member states will not follow Great Britain. This morning, right wing Dutch politicians talked about a “Nexit”…