Pound jumps as Britain, EU near Brexit deal on financial services

Return to sender: The UK and the EU are on song for a financial services agreement. (AFP)
Updated 01 November 2018
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Pound jumps as Britain, EU near Brexit deal on financial services

  • Britain’s Brexit ministry said progress was being made on reaching a financial services deal
  • Many top bankers fear that Brexit will slowly undermine London’s position as the world’s biggest international financial center

LONDON: A deal giving London, the world’s largest center of international finance, basic access to EU financial markets after Brexit is nearly done, a British official said.
Such a deal would give the UK a level of access to the EU similar to that of major US and Japanese firms, while tying it to many EU finance rules for years to come.
“We are making progress,” the official, who spoke on condition of anonymity, told Reuters.
But the official said the financial services deal would be based around the EU’s existing “equivalence” system — far short of the deep and preferential post-Brexit market access that many have been hoping for.
Another British official said that while there was progress, nothing was finalized yet.
The financial services deal was part of the overall Brexit deal that Prime Minister Theresa May hopes to strike by the end of the year at the latest, the second official said.
Britain’s Brexit ministry said progress was being made on reaching a financial services deal, while the European Commission had no immediate comment.
Many top bankers fear that Brexit will slowly undermine London’s position as the world’s biggest international financial center, and a Reuters survey found that, so far, just over 600 are moving away. Global banks have already reorganized some operations ahead of Britain’s departure from the EU, due on March 29.
The Times newspaper reported that a tentative deal had been reached on all aspects of a future partnership on services, as well as the exchange of data. The pound jumped following the report, extending gains in early trade to reach $1.2914.
Britain is currently home to the world’s largest number of banks and hosts the largest commercial insurance market.
About €6 trillion ($6.82 trillion) or 37 percent of Europe’s financial assets are managed in the UK capital, almost twice the amount of its nearest rival, Paris.
In addition, London dominates Europe’s €5.2 trillion investment banking industry.
Since Britain voted to leave the EU more than two years ago, some of the world’s most powerful finance companies in London have been searching for a way to preserve the existing cross-border flow of trading after Brexit.
The tentative deal being discussed falls far short of that.
Currently, inside the EU, banks and insurers in Britain enjoy unfettered access to customers across the bloc in all financial activities.
Equivalence, however, covers a more limited range of business and excludes major activities such as commercial bank lending. Law firm Hogan Lovells has estimated that equivalence rules cover just a quarter of all EU cross-border financial services business.
Supporters of Brexit had hoped that leaving the EU would allow them to dispense with EU rules on financial services, such as caps on bankers’ bonuses, to turbocharge London as a financial hub.
Britain’s Financial Conduct Authority said on Wednesday that UK financial rules should stay aligned with those in the EU after Brexit, a basic condition for Brussels to grant equivalence.


Infectious diseases are set to become as great a risk for global business as climate change

Updated 24 min 51 sec ago
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Infectious diseases are set to become as great a risk for global business as climate change

LONDON: The Global Risks Report 2019 jointly compiled by the World Economic Forum (WEF) and the Harvard Global Heath Institute describes a world that is woefully ill-prepared to detect and respond to disease outbreaks.
In fact, the world is becoming more vulnerable to pandemics, despite advances in medicine and public health.
Global GDP will fall by an average of 0.7 percent or $570 billion because of pandemics — a threat that is “in the same order of magnitude” to the losses estimated to be caused by climate change in the coming decades.
“Outbreaks are a top global economic risk and — like the case for climate change — large companies can no longer afford to stay on the sidelines,” said Vanessa Candeias, who heads the committee on future health and health care at the WEF.
Potential catastrophic outbreaks of disease occur only every few decades but regional and local epidemics are becoming more common. There have been nearly 200 a year in recent times and outbreaks of diseases such as influenza, Ebola, zika, yellow fever, SARS, and MERS have become more frequent over the last 30 years.
At the same time antibiotics have become less effective against bacteria.
The impact of influenza pandemics is estimated at $60 billion, according to a report by the Commission on a Global Health Risk Framework for the Future — more than double previous estimates.
The trend is expected to get worse as populations increase and become more mobile due to travel, trade or displacement. Deforestation and climate change are also factors.
Businesses need to bone up on the risk of infectious diseases and how to manage them if the overall economy is to remain resilient.
Peter Sands, research fellow at the Harvard Global Health Institute and executive director of the Global Fund to Fight Aids, Tuberculosis and Malaria, said, “When business leaders are more aware of what’s at stake, maybe there will be a different dialogue about global health, from being a topic that rarely touches the radar screen of business leaders to being a subject worthy of attention, investment and advocacy.”
Predicting where and when the next outbreak will come is an evolving science but it is possible to identify certain factors that would leave companies vulnerable to financial losses, such as the nature of the business, geographical location of the workforce, the customer base and supply chain.
Disease is not the only threat. There is also fear uninformed panic. Past epidemics have shown that misinformation spreads as fast as the infection itself and can undermine and disrupt medical response.
The report advises planning for such emergencies by “trusted public-private partnerships” so that “businesses can help mitigate the potentially devastating human and economic impacts of epidemics while protecting the interests of their employees and commercial operations.”
It is estimated that the outbreak of Ebola in West Africa in 2014-2016 cost $53 billion in lost commercial income and the 2015 MERS outbreak in South Korea cost $8.5 billion. According to the World Bank, disease accounts for only 30 percent of economic losses. The rest is largely down to healthy people changing their behavior as they seek to avoid becoming infected themselves.
The authors of the report will make recommendations next week at the World Economic Forum annual meeting in Davos.