The Central Bank has warned UK financial services firms and banks that providing unauthorised financial services to Irish residents after a no-deal Brexit would be a criminal offence.
The warning is contained in a letter to the chief executives of leading British lenders sent in April. In addition to retail banks, it is understood that leaders of other regulated entities, including asset managers, have been sent similar letters.
In the letter, the Central Bank says it expects UK banks to conduct an assessment to establish if customers will be affected by its loss of rights, and communicate the detrimental effect on existing contracts to its Irish-resident customers. They are also expected, the Central Bank says, to tell their customers that they will not be covered by the UK’s deposit guarantee scheme after Brexit.
In the event of the UK leaving the EU without a deal on access to the single market, or an equivalency arrangement on standards, UK lenders would be severely restricted in their Irish activities, and would have to gain additional authorisations in order to continue operating in the Irish market.
The letter warns the British finance houses that any restrictions may apply to existing loans as well as the provision of new business in Ireland.
Sources in the industry say that could affect a wide swathe of consumers. It would include ordinary holders of retail products, such as mortgages or small business loans, which are a common feature among Irish residents who drew down a home loan from a UK bank for a purchase in the UK, or similar investment in a business there.
Particular challenge
Refinancing loans could prove to be particularly challenging, meaning that even if Irish residents can continue servicing loans drawn down from UK banks, getting the best deal available in the market could prove problematic.
Also affected would be high net worth individuals or syndicates of professional investors who are financed by British lenders or use services provided by the financial sector in London. The letter, sources said, shows the extent of the impact on consumers in Ireland arising from the deep financial links between the UK and here, and how they might be curtailed or severed by Brexit.
Sources in Dublin said similar communications had been received from the Central Bank, leading other financial services firms operating in Ireland to stop offering certain retail products.
A spokesman for the Central Bank confirmed that it had issued the letters in April. “The loss of Freedom of Establishment and Freedom of Services rights may affect the ability of firms to continue providing certain obligations and activities and ensure service continuity with regard to contracts concluded before the withdrawal date.”
The spokesman said it was the companies’ responsibility to satisfy themselves of their obligations.
“Until there is legal certainty that a transition period will apply, the Central Bank expects firms to continue to plan for all plausible contingencies, including the possibility of a hard Brexit.”
