Question to the HM Treasury:

To ask Her Majesty's Government what assessment they have made of the warning by the Bank of England regarding the impact of Brexit on the derivatives markets.

As set out in the Bank of England’s Financial Stability Report, derivative markets could be impacted by the UK’s exit from the EU.

The government has committed to legislate, if necessary, to give UK regulators the power to issue ‘temporary permissions’ for EEA financial services firms to continue operating in the UK for a limited period after withdrawal. However, as the FPC notes in its June 2018 report, “In some areas, such as derivatives contracts, actions would be needed by both UK and EU authorities to preserve the continuity of existing cross-border contracts”.

More broadly, as the Chancellor said on 20 December 2017: “the government is strongly supportive of continued engagement and cooperation between UK and EU regulators to protect financial stability”. HM Treasury and the Commission announced on 27 April that the Bank of England and the European Central Bank will convene a technical working group on risk management in the period around 30 March 2019 in the area of financial services. The working group is up and running and is meeting regularly. This demonstrates a commitment from both the EU and UK to work together to manage shared risks, and will help provide further confidence to financial services firms and their customers as we exit the EU.

In addition, the Chancellor has proposed a new partnership that will focus on developing a mutually agreed and objective framework which maximises the provision of the most important international financial services offerings between the UK and the EU, in a way that is enduring, reliable and ensures financial stability risks can properly be managed.