Brexit Alert | Financial services

The contemplated leave by the United Kingdom (UK) of the European Union (EU) is, with Brexit negotiations only slowly moving forward, still is an item frequently discussed.

As to financial services, there is uncertainty whether financial institutions that operate from the UK on the basis of incoming passports in the EU (UK as their home state) will have continued access to the EU-markets after Brexit.

As a result market parties are preparing for Brexit. Earlier this week, the Chicago Mercantile Exchange (CME) announced that, for reasons of the upcoming Brexit, it moves its trading platform BrokerTecEurope, from London to Amsterdam, as a result whereof a rough amount of EUR 2.1 billion short term financings and bonds will be traded in Amsterdam. Though this trade forms a relatively small part of CME (whose market value is assessed to USD 63 billion) the choice to move to Amsterdam has large symbolic value.

The Dutch supervisory authority, the AFM (Autoriteit Financiële Markten) recently published its views on Brexit. The AFM holds the view that Brexit is the biggest source of political uncertainty for the financial sector in Europe and that market parties should be aware that a no deal Brexit is not unlikely. Market parties are appealed to prepare themselves since acute and significant transaction risks lie on wait. A no deal Brexit will lead to the immediate loss of market access by EU companies to the UK and vice versa. Furthermore, as the AFM states, Brexit will cause a revolution on the European capital markets.

In the meantime, many UK financial institutions apply for a license with the AFM in order to, from the Netherlands, continue their operations throughout the EU and to prevent that after Brexit, they will be deprived from access to the EU markets. The AFM even expects that the Netherlands will post-Brexit become the center for the financial trade infrastructure within the EU with approximately 30-40 per cent of European financial trade being conducted from the Netherlands.

As the Brexit date (29 March 2019) approaches rapidly, financial institutions such as payment institutions, investment firms and multilateral trading facilities (e.g. on-line trading platforms) wanting to safeguard their operations within the EU, are encouraged to apply for a license in the Netherlands. The AFM earlier announced that in any case all license applications made prior to 1 July 2018 would be finalized prior to 29 March 2019 and the AFM recently made clear that this does not purport to state that license applications filed later than that date, will not be finalized in time before Brexit.

If you are contemplating to start financial activities from the Netherlands, this should be done the earlier the better. Starting a Dutch financial institution involves, apart from the licensing procedure, legal work in various fields of law.

Buren N.V. is fully equipped to assist with all aspect of the migration. This includes:

• incorporation of Dutch entities;
• assistance with the AFM license procedures (or: license procedures with the Dutch Central Bank, for payment institutions);
• employment advice;
• contracts (commercial contracts, management contracts);
• real estate; and
• tax advice.