Thomas J. Reid is Managing Partner of Davis Polk & Wardwell LLP. This post is based on a Davis Polk memorandum. Additional posts on the legal and financial impact of Brexit are available here.
August has arrived and, with it, little additional clarity on next steps in the Brexit process. Speculation remains rife about the objectives of the UK Government in the negotiations. Will it seek access to the single market, will it pursue a clean break from the EU, or will a hybrid engagement model emerge? What has become clear in recent weeks, however, is who will be leading the negotiations. David Davis, the Secretary of State for Exiting the EU, will manage the negotiations on the UK’s behalf, while Michel Barnier, a former European Commissioner responsible for financial services, will act as the EU’s chief negotiator.
In the third The Law and Brexit post, we examine the development of the Total Loss Absorbing Capacity (“TLAC”) and Minimum Requirement for Own Funds and Eligible Liabilities (“MREL”) standards applicable to financial institutions, the UK’s proposed implementation of these standards and how Brexit might affect such implementation. We conclude that the UK’s ability to influence the final EU standards is likely to diminish as it negotiates the terms of its withdrawal from the EU. In addition, while there may be some divergence in the way in which the TLAC and MREL standards will be applied in the UK and the EU, an overarching trend towards convergence may attenuate the adverse consequences that could result from parallel regimes.
