The Bank of England has warned £20trn worth of derivative contracts could seize up on Brexit unless a legal solution is specified in any withdrawal agreement.
Appearing before a House of Lords select committee this week, deputy governor Sam Woods urged the Government to take action to provide legal certainty for cross-border contracts, the Financial Times reports.
It would leave firms exposed to market or currency movements and interest rate risk.
Woods explained a regulated entity was needed for a client to exercise an option on a derivatives contract.
Woods added it may also be illegal for insurers to pay out on a cross-border policy after Brexit – including for pension products. He said insurers liabilities under long-term cross-border deals ran into billions of pounds.
The select committee also heard confirmation that the Bank of England expects 10,000 jobs to leave the City on “day one” of Brexit according to worst-case contingency planning presented by firms to the PRA.