Having now voted to leave the EU, we can expect an enormous impact on financial services regulation in the UK. Financial institutions (including banks, investment firms, insurers, insurance intermediaries, fund managers, mortgage and consumer credit firms and payment services providers) that have cross border operations will be impacted by the now inevitable change in the regulatory regime they operate under. The extent of this impact will now of course depend on the success of the Government's negotiations with the EU.
EU law is the bedrock of financial services regulation in this country and the UK legislature is now faced with the task of deciding whether to replicate or diverge from the current state of affairs that has seen decades of enormous effort and investment in implementing EU law. For example, the EU's capital requirements regulation (and all other EU regulations for that matter), which is directly applicable in the UK, will need to be re-assessed and re-enacted in the UK if lawmakers want it to continue to apply.
A number of the world's biggest financial institutions have adopted a business model based on passporting their EU-wide operations from the UK. Before Brexit the UK was the EU's largest financial centre and financial institutions will be able to take advantage of the ability to 'passport' their services around the EU without having to establish expensive fully-fledged local operations in other member states only until Brexit is effective. It remains unclear if a similar regime will be put in place post Brexit and a failure to negotiate a similar scheme may result in restricted access to EU markets by firms based in the UK. Until the negotiation of the UK's new relationship with the EU is complete, it will raise questions of where firms should base their operations.
Having to relocate operations would unlikely be the end of firms' investment and strategic considerations. Product terms, distribution agreements and marketing literature will likely now need to be reviewed to deal with the impending regulatory separation.