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Law 360: Brexit Achieves The Opposite Of Intended Effect In Banking

Home > Perspectives > Law 360: Brexit Achieves The Opposite Of Intended Effect In Banking

U.K. “leave” campaigners promised that a vote for Brexit was a vote to free businesses from costly and burdensome EU-imposed regulations. Political ads touted the billions spent complying with regulations and supporting the EU budget. Unencumbered by the political and economic constraints of EU membership, businesses would soar to achieve new levels of growth as the economy experienced the many benefits of an independent U.K.

A little more than a month later, it’s beginning to look like just the opposite is true for the U.K. banking sector as Brexit realities set in. The political and economic landscape is now more volatile than ever, arguably putting businesses even more at the mercy of the EU than before. European cities are competing to lure banking jobs out of London, the previously undisputed financial hub of Europe. And contrary to the sentiments that drove more than 15 million citizens to vote to leave the EU, the banking industry has asked to preserve the existing regulatory framework. It appears that the U.K. banking sector will bear all of the costs associated with Brexit while missing out on the gains that fervent campaigners promised.

In the days following the referendum, it was clear that the U.K.’s decision had upset the delicate marriage of political personalities in the EU. Of course, over the years the banking sector has been the subject of regulatory reform that, at times, has been quite stringent. However, such burdens may pale in comparison with what is to come judging from some EU leaders’ emotionally charged political rhetoric. EU Council President Donald Tusk dashed hopes for a cherry picking of EU member benefits, saying there would be “no single market a la carte.”

The U.K. is now being hurried out of the economic bloc even before triggering Article 50 of the Lisbon Treaty. Jean Claude Juncker, European Commissionpresident, insisted the U.K. not prolong negotiations and instead, “get started immediately.” With Prime Minister Theresa May committing “Brexit means Brexit,” the EU has seemed to respond in turn that the “EU means the EU,” saying the U.K. could not access the European single market without adhering to the “four freedoms” — the free movement of goods, services, capital and people.

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