LONDON (Reuters) - Britain leaving the European Union midweek without a deal would compound market disruption as banks would not have enough time to make technology changes, a European banking industry body said on Tuesday.
Brexit had been due to take place late on Friday, March 29, and then at the same time on Friday, April 12, both of which gave banks a full weekend to get their systems ready if there is a no-deal exit.
The latest deadline is midnight on Thursday, Oct. 31, with the markets open the next day in Britain and some EU states.
“This will give rise to additional operational challenges, in particular mid-week code release for new reporting as firms will not have a weekend in which to switch over systems,” the Association for Financial Markets in Europe (AFME) said in a paper on market preparations for a no-deal Brexit.
Global trading banks may have to report trades to a different regulator, depending on where they are based. Such a switch would normally require a full weekend to ensure proper testing.
Additional challenges may arise from Nov. 1 being a public holiday in many but not all EU countries, meaning not all regulators may be in place on that day, AFME said.
Sterling plunged to a six-month low against the euro on Tuesday and approached two-year lows against the dollar, as the two candidates to lead Britain’s ruling Conservative Party vied for the hardest Brexit stance to win over its members.
Markets see their positions as sharply raising the risk of Britain leaving the European Union on Oct. 31 without any transitional trading agreements in place.
The Bank of England said last week that in the absence of further actions by EU authorities, some disruption to cross-border financial services is possible from a no-deal departure.
AFME also called on the EU to extend the temporary market access it has granted for LCH (LSE.L) and other clearing houses in London.
Access under a no-deal Brexit would end on March 30, 2020, and unless there is an extension, clearers may have to force EU customers in December to begin moving derivatives positions from Britain ahead of the March expiry date, AFME said.
Reporting by Huw Jones; Editing by Catherine Evans