The European Commission and the UK Treasury have called for the European Central Bank (ECB) and the Bank of England (BoE) to set up a working group to examine risk management in the financial services sector as the UK leaves the EU.
The technical working group will be chaired by the ECB president Mario Draghi and BoE governor Mark Carney, with the European Commission and HM Treasury observing and other relevant authorities invited on an "issue-specific" basis.
The group will look at risk management in the sector around the period when the UK formally leaves the EU on 29 March 2019.
However its work will be separate from the negotiations on the withdrawal agreement between the EU and the UK and the framework on their future relationships.
Banking expert Tony Anderson of Pinsent Masons, the law firm behind Out-Law.com, said the group's establishment was a welcome step.
"This represents pragmatic co-operative risk management across the jurisdictional divide and will hopefully ensure that the economic rationale prevails over the political as the deadline of 29 March 2019 approaches," Anderson said.
"This is crucial as there is still not certainty on the position of financial services between the UK and the EU during the transition period. This initiative is designed to address this uncertainty," Anderson said.
Pinsent Masons banking expert Charlie Clarence-Smith said the working group was a "positive and pragmatic development in this current period of uncertainty".
"The new working group encompasses invaluable expertise from the Bank of England and the European Central Bank, and should provide comfort to businesses concerned about the potential financial disruption if Britain leaves the EU without a deal," Clarence-Smith said.
There remains significant uncertainty over the future regulation of the financial services sector, as with many other areas. According to a recent report by Pinsent Masons, the majority of the UK's biggest companies have already triggered Brexit 'no deal' contingency plans.
Last week the joint committee of the EU supervisory authorities said Brexit was one of the key risks to the EU financial system, adding that financial services firms needed to look at how they provided for contract continuity and the potential relocation of operations before the withdrawal.
In the terms of reference (1 page / 323KB PDF) for the new working group the European Commission noted that the primary responsibility to prepare for Brexit remained with market participants, rather than the authorities.
A number of banks and financial institutions have announced plans to relocate to the EU in order to continue operating in the euro area after Brexit. Last year the ECB criticised some of these plans, saying they could create risks in crisis situations.
The BoE issued a consultation paper in December last year outlining its proposals over how it will approach authorisation and supervision of international banks after Brexit.
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