Lack of International Risk Management in BREXIT?

Paul Welfens

No disbei246, EIIW Discussion paper from Universitätsbibliothek Wuppertal, University Library

Abstract: BREXIT is a historical step for the UK and the EU27 which could bring a strong Pound deprecation, an increase in risk premiums for British bonds and a transitory rise of financial market volatility plus a long term reduction of economic growth in the UK. Macroprudential supervision thus is a crucial policy challenge for EU28 in the context of BREXIT and the European Systemic Risk Board thus should have a critical role in 2018 and the following years. The ESRB should timely analyze the potential risk of BREXIT and consider adequate policy options to reduce or eliminate risks. Contract continuity as well as cooperation in prudential supervision between the EU27 and the UK stand for BREXIT-related problems that could create financial market stability - as is the BREXIT-induced UK deregulation pressure. EU prudential supervision post-BREXIT faces problems since a very large part of EU27 wholesale banking markets are in the UK and thus not regulated by the EU after March 29, 2019. The EU Commission's competence for EU trade policy as well as international investment treaties gives the EU the opportunity to offer the UK not only a - limited - Free Trade Agreement but an international investment treaty as well, including options for global cooperation. Several policy innovations are proposed which could help to limit risk associated with instability.

Keywords: Macroprudential supervision; Brexit; EU; financial risk; economic policy (search for similar items in EconPapers)
JEL-codes: E5 E58 G32 N14 (search for similar items in EconPapers)
Pages: 75 Pages
Date: 2018-07
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Lack of international risk management in BREXIT? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bwu:eiiwdp:disbei246

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