The financial ramifications of Brexit are still very uncertain and perhaps the most anticipated aspect of the withdrawal negotiations. Although progress is being made, all the experts, including MSE's founder Martin Lewis and the Bank OF England, are encouraging Brits to be prepared for some fluctuations and uncertainty whilst the dust settles.
Today we are looking at the effects on different kinds of capital to help you to prepared and to make the most out of this situation, especially if Britain does leave the EU without a deal in place.
Regardless of the Brexit outcome, the financial services compensation scheme is in place to protect the money you hold in UK bank accounts. However, this is limited up to £85,000 and does require the bank, building society or credit unions to be accredited in the UK, but you do not have to live in the UK to benefit from this regulation. The only exception is if you bank with a Gibraltarian financial service, you will need to enquire with their version of the same scheme. Consumers that live in the UK will still enjoy protection for personal finances after Brexit, as this has been established into UK law.
If the bank holding your deposits does not have a UK branch, you could have protection up to 100,000euro in the EEA/EU home state deposit guarantee scheme.
EU banks that have branches or operate within the UK will still be able to continue to do so for up to three years after the leave date. You will still be free to withdraw your money and use direct debits between providers and services from UK providers. This may change as exit procedures and changes become clearer but there will be no need to make immediate changes to your methods of payment.
It will still be possible to use your debit and credit cards freely throughout Europe, even if they are registered with a UK-based bank. However, in the future, it will be up to the individual countries discretion if they would like to apply a surcharge for card transactions.
It's important to understand that all banking institutions will be different and thus will implement different strategies and criteria for applying for financial services throughout the process of leaving the EU. For many UK residents who bank with UK-registered banks, it is unlikely that there will be any major changes to the application process or any additional fees. For example, HSBC only provide unsecure personal loans to UK residents and thus will not be impacted. Yet, it is worth noting that your ability to repay your existing loans may be subject to inflation changes.
Economists and financial service institutions are currently unsure as to how the GBP is going to react to leaving the EU. If the pound is not resilient, the economy may experience a temporary recession and thus the banking industry might suffer and be more averse to high-risk borrowers as a result. Recessions can cause difficult financial situations for many people, which could leave many people unable to pay their priority bills and and even in need of emergency funding, such as short term loans, to cover them for unexpected bills until the next payday. This loan type will be subject to applications and credit checks. Unlike in the credit crunch of 2008, FCA regulations have come into place that are much stricter and now limit access to HCSTCL (high cost short term credit lending) to those who can afford it. Regulations that were implemented by the FCA in 2015, such as the price cap on default fees, were brought in to the UK and proceeded to influence EU regulations.
For more information about changes to your loans and existing financial services, you should speak to your provider.
