INSUBCONTINENT EXCLUSIVE:
UK officials have been warning EU27 nations that a "no-deal" Brexit places a high risk of financial disruption to their banks, Sky News
understands.It forms part of a move seen by some close observers as a perceived form of attempted leverage over the Brexit
negotiation.Dozens of banks, including some of Europe's biggest in Germany and France, have complex outstanding financial contracts, known
as derivatives, notionally worth tens of trillions of pounds, operated through the City of London.The bulk of them will mature after March
2019.Sky sources say that the names of specific EU mega-banks especially exposed to and reliant on UK cleared derivatives have been
mentioned in discussions.
1:09
Video:May: Irish backstop must be temporaryLast month,
the Bank of England warned there was high risk of disruption to the EU financial system from both "cleared" and "uncleared" derivatives
markets, while it said risks to the UK itself were low and declining.The European Commission has acted on some concerns to say it will
temporarily continue to recognise UK "central counterparties" even after a no-deal Brexit.But officials have warned that the lack of detail
means that contracts need to be closed or transferred from the UK before March 2019, a process that needs to start this month, now that the
deal has not passed the House of Commons.Furthermore, the European Commission indicated to the Bank of England that risks from "uncleared"
derivatives would not be dealt with at EU level, and was being left to individual EU nations to handle.
0:28
Video:Rees-Mogg: I want Johnson to replace MayIn a recent report, the Bank of England concluded: "The movement of a
large volume of contracts in a short time frame would be costly to, and disrupt the derivatives positions of, EU businesses and could strain
capacity in the derivatives market."An EU source told Sky News: "We have not dealt with it yet but we have the mechanisms."The European
Commission is waiting to ramp up no-deal preparations at the EU summit this week.Sky News understands an emergency implementing act is being
prepared for the EU Council and Parliament to consider as soon as next week.
