Earlier this month the Bank of England's Prudential Regulation Authority (the 'PRA') wrote to all UK companies undertaking cross-border activities between the UK and the EU under passporting arrangements, requesting a summary of their Brexit contingency plans.
The letter continues the regulator's focus on ensuring firms have robust measures and business strategies in place to respond to market turbulence. Addressed to the CEO/Branch Manager of each company, the letter states that firms are expected to create concrete contingency plans for a variety of potential scenarios (given the wide range of possible outcomes), in light of the UK Government's decision to trigger Article 50. This is to ensure the safety and soundness of each company's UK operation, and to mitigate any risk of adverse financial consequences through effective structural planning e.g. setting up a subsidiary.
Interestingly, the PRA stated that although it was aware that many of its firms were well-advanced in their Brexit planning, the adequacy of these plans appeared uneven across companies, with many not being sufficiently tested against the most adverse outcomes. It further stated that the responses submitted by firms would be used to shape the Bank's own plans.
The letter highlights the need for UK companies to face the physical reality of Brexit and it will be interesting to see the types of contingency plans that emerge as a result.
The Prime Minister's decision on Tuesday to call a snap General Election will not make this task any easier, at least in the short term, as the 'hardness' or 'softness' of Brexit is once again up for grabs.
For further information please see a copy of the letter here.
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