Brexit and debt capital markets

Brexit and debt capital markets

Piers Summerfield, partner at Simmons and Simmons, looks at how the UK’s vote to leave the EU may impact on debt securities.

What is the immediate impact of the UK's vote in favour of Brexit on the debt capital markets?

The immediate impact is minimal, and relates primarily to levels of activity in the markets—there was a significant slowdown in activity in the markets in the run up to the Brexit referendum, and it awaits to be seen how quickly (and to what extent) activity in the markets picks up after the summer break (when activity is typically more muted anyway). From a purely legal perspective, there is nothing to stop transactions proceeding at the current time.

Regarding the immediate impact of the UK's vote in favour of Brexit on the debt capital markets, is it reassuring that EU law will continue to apply until at least two years after Article 50 TEU is triggered?

It is reassuring, in that it leaves time for changes to be made in a relatively orderly manner. Given how much of the law surrounding debt capital markets issuance is derived from EU Directives and Regulations the key question is to what extent these provisions will apply once the UK is no longer part of the EU. Some of the legislation is now on the UK statute books anyway, but it would potentially generate a lot of uncertainty if EU laws had to be replaced in a very short timeframe.

What is the likely long-term effect of Brexit on the debt capital markets?

The debt capital markets are, by nature, international and outside the UK the effect is likely to be relatively minor. It remains to be seen how things will develop in the UK, and whether, for example, the UK will become less attractive for issuers both in terms of offering securities to UK investors

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About the author:

Meet Emma:

1.  Banking and finance lawyer with experience in derivatives, debt capital markets, securitisation and structured finance in London and Paris

2.  Likes ballet, playing the harp and holidays

3.  Thinks the law is always changing!

Emma trained and qualified at Allen & Overy LLP and worked in their derivatives and structured finance teams in London and Paris.  She then joined the foreign exchange prime brokerage legal team at Deutsche Bank before spending 4 ½ years with Crédit Agricole CIB advising the fixed income and derivatives desk.