ECB reminder to banks to implement Brexit plans
On 13 November 2019, the European Central Bank (ECB) published an article on its website reminding banks that operational risk increases as they delay the implementation of their Brexit plans. The article repeats the same warning issued in August 2019 before the third extension of the Article 50 period (see previous blog) with an increased stress on operational activities.
The ECB has found that banks are delaying transfers of assets and customers as well as necessary changes to their IT systems, operations and organisational set-up. The ECB warns banks against waiting until the last minute to implement large scale measures involving third parties as they could result in significant bottlenecks leading to coordination failures.
In the article, the ECB outlines areas where action is still needed, including: internal governance, business origination and access to financial market infrastructures, booking models, intragroup arrangements, and IT infrastructure and reporting.
As set out in the August 2019 reminder, the continuity of uncleared cross-border derivatives contracts still remains an issue. The ECB has observed that a number of banks are making insufficient progress with novation due to, among other things, banks’ reliance on contingency measures adopted at the national level in EU Member States and difficulties in negotiations with clients.