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Are you ready for Brexit and the potential impact on the derivatives market?

In September 2017, the Bank of England requested special arrangements to be put in place to protect the UK derivatives market when it leaves the European Union. This will protect the £20 trillion currently held in derivatives contracts between the UK and other EU country members. The Bank is assessing the derivatives situation, and "exploring actions" that could be taken where it might be too “complex and difficult” for financial firms to offset risks arising from the continuity of contracts between UK and the EU counterparties, themselves. The Bank has said that should the status of these derivatives not be resolved in any Brexit agreement, then tens of thousands of parties with tied-up derivatives contracts will be affected which will amount to "close to a quarter of all UK and EU client uncleared derivative contracts".

The UK is a major centre for over-the-counter (OTC) derivatives (contracts individually agreed between two parties). It also deals with nearly half of global activity in interest rate derivatives, and more than a third of all global activity in foreign exchange derivatives contracts. Overall this amounts to approximately €1.3 trillion of UK-based bank assets that are used for the cross-border provision of financial products and services and a very significant volume of contracts. 

Published:26 October 2017

Pensions Law Update - October 2017

Key Contact

Penny Cogher