Warnings from Barclays and Other Banks: The Impact of No-Deal Brexit on Financial Regulation

The recent High Court ruling allowing Barclays Bank to shift assets to Ireland is a stark reminder of the complex and evolving landscape of financial regulation post-Brexit. This move, undertaken to mitigate the risks associated with the lack of European Economic Area (EEA) passporting rights, has raised broader questions about the role of banks in the Brexit discourse and whether they have a responsibility to speak out publicly against its potential risks.

Regulation and the Banking Sector

Banks, like Barclays, are not speaking out against Brexit due to the opportunities it presents in terms of deregulation. This is a long-standing phenomenon; the deregulation that paved the way for the Big Bang in the City of London was rooted in the very deregulatory changes that Brexit is now promoting. An independent City of London from the EU allows banks to innovate and potentially streamline some cumbersome regulations.

However, this approach is not without its risks. If banks decide to take on significant risks in a deregulated environment, it could lead to financial crises. This is why many in the financial sector are muted about Brexit. They understand the potential downsides but also recognize their primary responsibility to their shareholders.

History of Financial Risks in the UK

It is notable that the taxpayers' bailouts of British banks in 2008 disproportionately burdened the state and taxpayers. The bailouts amounted to ￡40 billion, and it was the British taxpayer who had to pick up the tab as a result of the banks' risky financial adventures in Ireland. This episode underscores the fact that banks are often 'private' in the good times but 'public' in the bad, meaning they rely on the state's support during financial crises.

The recent decision by Barclays to shift its assets to Ireland reflects a strategic move to ensure the bank remains resilient in the face of potential Brexit outcomes. This decision is hardly surprising, given the complexities of the post-Brexit regulatory environment.

The Role of Banks in the Brexit Debate

Barclays, like HSBC, has been vocal in warning about the adverse effects of a No-Deal Brexit. In fact, multiple FTSE 100 companies advocated for Remain, including:

Unilever Airbus Easyjet BAE Systems Shell BT Innocent Marks and Spencer Diageo Anglo American Ryan Air The Guardian The Observer The Daily Mail

While Barclays and other banks do have a responsibility to their shareholders, their first duty is to their business continuity. Their warnings have been publicly disseminated through various channels, including company reports and communications to shareholders and customers.

However, it is also important to note that the warnings from the financial sector were often dismissed as 'project fear,' a term used to discredit any negative predictions about Brexit. Despite this, the financial stakes are too high for banks to remain silent. In the end, it is a delicate balance between fulfilling their fiduciary responsibilities and contributing to public discourse.

Conclusion

The decision by Barclays to shift assets to Ireland illustrates the ongoing challenges and uncertainties facing the financial sector due to Brexit. Banks need to navigate a complex regulatory landscape, yet their role in public discourse is often contentious. While they must prioritize their business interests, they cannot ignore the broader implications of their actions on the stability of the financial sector and the economy as a whole.