Woods, who is also deputy governor of the Bank of England, said the regulator has already identified two key risks including the extra costs and risks firms may incur through fragmentation caused by Brexit and the disruption to the servicing of existing contracts and obstacles to data transfer.
He also warned that the regulator could suffer a significant “material extra burden” by having to regulate more firms when Brexit is undertaken and noted that this and several other concerns posed “a material risk to our objectives, and this work is therefore a top priority”.
Woods responded to newly-appointed chair of the Treasury Committee Nicky Morgan’s request on 2 August, following an extensive survey of financial services firms, which received 401 responses operating across borders on their preparedness for Brexit.
Morgan said the cliff edge facing businesses in April 2019 was a cause for concern, particularly in the financial services sector.
She also quizzed the regulator about whether it had the capacity to deal with an increased oversight burden once the UK had left the EU.
The Brexit deal is due to be ratified in March 2019 and all Brexit negotiations must complete by April 2019 with any further delay individually agreed by each member state.
No deal risks
Morgan said: “Based on the information the PRA has collected, I have asked Sam Woods about how banks and insurers will respond as the Brexit deadline approaches, and the key risks of a no deal scenario.
“I have also asked Mr Woods for his views on the desirability and design of a transitional arrangement with the EU, to provide more time to negotiate and prepare for a new UK-EU economic relationship.
“Getting these arrangements right will be crucial for ensuring that the City retains its pre-eminence as a global financial centre, and to protect the economy and jobs as the UK leaves the EU.”
Meanwhile, Brexit appears to be taking its toll on financial security already, with 30% of British adults revealing that they are specifically worried about political uncertainty in the UK and Europe.
However, the Close Brothers research which was carried out by YouGov, reveals that 11% of adults are likely to increase the frequency with which they receive financial advice since the UK voted to leave the EU as they look to ensure that they are financially prepared for the possibility of bumpy years ahead.