UK financial services and Brexit

UK Financial Services

R.Kannan

5th May 2017

Mega Trends• Increased Geo political issues in the world.• The rise of terrorism across the world.• Tensions in South China Sea.• Threats by North Korea.• Frequent changes in Government policies

across the world / uncertainty of continuity of policies.

• Increasing protectionism• Rising tensions across borders

Why UK is best place for Global Financial Services

• Robust Economy• The leading Financial Centre in the world.• Low interest rates• Domain expertise in • Open Economy• Citizens from around the world• Investments from around the world• Very good Eco system for Financial Services• Most of the Global Multinationals having

operations.• Good financial infrastructure

Present Status• Despite predictions of big impact on Brexit on the Financial

services, the sector continues to do well.• The major players in the sector reported good results.• The Economic activity continues to be steady and among the

best in Europe today.• Even in the reduced interest environment, Net Interest

Margins continue to be steady.• The capital adequacy ratio has improved.• High Dependence on EU for the financial services exports.• World Class regulation is giving the required support to keep

the leadership position

UK and EU Financial Services

UK Banking System in 2014

Assets under Management

Number of Cross Border Funds

Emerging Risks• Implementation of Brexit Provisions.• Likely reduction in Economic Activity.• Shortage of skilled employees• Transition to new regime creating uncertainty.• Elongated Transition period• Likely reduction in Services exports to EU.• Likely reduction of operations by Incumbents.• Cyber security.• Other Financial Centres trying to take lead

Likely Impact of Brexit

Vision

• Vision for Financial Service could be , “ Remain the leading Financial Centre in the world . “

• Mission for the Bank of England has been already well defined.

Objectives• To make the Eco system more competitive and make UK more

attractive for Financial services. To help attract more FDI into UK.• Keep the debt levels at desirable levels at Country level, Firm level

and Individual level.• To help achieve an Economic Growth of 2% every year .• To maintain the inflation of 2%.• To develop strategies to achieve an annual growth of 4% p.a in

Financial Services.• To help achieve an unemployment level of less than 5%.• Catalyze the Faster adoption of Fintech• Catalyze the development best Cyber security solutions.• Always ensure an integrated approach to regulation of financial

services.• Catalyze Optimum utilisation of Capital Financial Services entities

Opportunities• Adoption of Fintech.• Fast growing countries in the world.• Offer the boquet of products available in the UK market to

countries which are looking at developing their financial services market.

• Assist the countries which are in the phase of developing their financial markets and link these new markets to UK Financial services through JV’s , Tech transfers and sharing of infrastructure.

• Bond / Share issuances from countries like India, China, Brazil, Mexico, Russia.

• Introduction of Sharia Products and help countries from Middle East and Africa to raise capital .

Strategies• Already well defined documents on strategy are available.• Create a global campaign to market UK as the Centre for

Financial Services.• Conduct Road shows.• Create specific strategies for attracting more FDI and more

short term flows.• Set the policy rate based on GDP growth, Unemployment /

Under employment / Inflation levels.• Whenever changing the policy rate, change the rate by 10 bps

which makes it easier increase or decrease later.

Strategies

• Take the lead in signing the MOUs / agreements with other Regulators in EU even before other agreements relating to Brexit kicks in. The terms could be same as what is the status quo with the European Union Today.

• Convince the government, the need for employing skilled professionals from EU and other countries in the world and not to disrupt the existing employees in the system.

• Create special incentives for existing Financial services firms to continue their commitment to UK.

• Create a contingency plan for each sector of operation at Central Bank level.

• Create new plans with a higher growth target for Banking, Insurance and Asset Management sector.

Strategies• Guide the Financial Services firms to prepare their

contingency plans for addressing the Brexit .• Encourage the firms to look at new markets and new

products/ services to grow their business.• In the light of the Brexit, the existing Structures, Systems and

processes could be reviewed and if any modification is required, it could be effected.

• Create a kitty for addressing the effects of budget. Make a provision in the budget for various measures required to address the challenges posed by Brexit.

• The budget could be for the next three years .

Thank you