German Firms May Face Financial Services Restrictions Due to Brexit

(Bloomberg) -- German companies could face “certain restrictions” if they plan to rely on U.K. financial services firms for new transactions after a potential no-deal Brexit.

Still, the German Finance Ministry said it doesn’t expect “more significant burdens” because companies should largely be able to find counterparties in the remaining 27 European Union countries.

European companies have long used London for many of their banking services and would be cut off from one day to the next if the U.K. leaves the EU without a deal. Germany has sought to limit fallout from that cliff edge by empowering its financial markets regulator to temporarily allow U.K.-based firms to continue doing business agreed before Brexit day.

“Many U.K.-based financial institutions were timely in seeking supervisory authorizations for their EU27 units to be prepared in case of a disorderly Brexit and avoid limitations on new business,” the Finance Ministry wrote in a written response to a lawmaker published Tuesday by the Bundestag.

Treating commodity derivatives traded in the U.K. as over-the-counter swaps could reduce liquidity if EU market participants scale back or abandon their activities because of higher costs, the ministry said. That would be largely offset if such transactions move to exchanges such as those run by Deutsche Boerse AG or to other EU markets, thereby limiting any increase in prices, according to the response.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Chris Reiter, Iain Rogers

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