Report: Brexit's Minimal Impact on Australian Financial Institutions

This report examines the Australian Council of Financial Regulators' (CFR) assessment of Brexit's impact on Australian financial institutions, concluding that the direct impact is minor. The analysis highlights several reasons for this limited effect, including the limited exposure of Australian financial institutions to the UK and European regions, the orderly functioning of the Australian short-term market, and limited trade linkages between Australia and the UK. The report also references the Australian government's proactive measures, such as planning a fast-tracked trade agreement with the UK in case of a no-deal Brexit and the shifting of globalized business operations from the UK to other parts of the world. The author agrees with the CFR's assessment, emphasizing the government's strategic measures, strong coordination, and sound liquidity position, as well as the proactive steps taken by institutions to address the situation effectively.

MONEY AND CAPITAL MARKET

The Australia’s Council of Financial Regulators (CFR) has estimated the direct impact of
Brexit on the operations and resilience of Australia’s financial institutions to be minor. The
same has been explained as follows. The operations resilience is defined as the ability of a
financial institution to adapt to the changes of the dynamic business environment rapidly. It
must be noted that in context of Australia the depth of the legal compliances incidental to
various aspects of the operations and resilience have expanded considerably. The services,
which have driven the operations and resilience over the years for Australia, are the enhanced
synergy among the strategic and financial institutions, reduction of the operational risks and
efficient allocation of the resources.
Some of the reasons by the virtue of which there would be minor impacts on the operations
and resilience of Australian Financial Institutions are listed as follows. The first reason is that
there is a limited exposure of the Australian Financial Institutions to the regions of Europe
and UK, which limits the exposure to direct shock waves as well. The following picture is
descriptive of the same.
(Source: Australia Government, 2019)
The second reason that can be stated for the said minor impact is the orderly functioning of
the short-term market of the Australian economy. The debts raised form the UK markets have
considerably been brought down over the last decade together with the adequate liquidity in
the market as maintained by the RBA. This secures the Australia’s position as against the

temporary disruptions caused to the debt raising markets of Australia. The third key reason
that backs the Australia’s position against the Brexit is the limited trade linkages of Australia
and UK. It is significant to note that the Australia’s major trade exposure has been to the
regions of Asia and Europe and therefore there is no direct connection with UK. The direct
trade exposure that is in terms of exports of the goods and services can be stated to be 2.8 per
cent of the total exports. In addition to the above, as stated by the trade minister of Australia,
the government has already weighed down the implications of the “No- Deal Brexit” and if
such a situation arises, a fast-tracked trade agreement would be signed with the UK (The Irish
Times, 2019). The step would be taken to reduce the disturbance in trade due to the Hard
Brexit deal. Yet another major factors that contributes towards the minor impact is that the
Australian Institutions are further securing their business positions by shifting the globalised
business operations from UK to the other parts of the world. For instance, one of the largest
banks of the country have planned for shifting the operations from London to Amsterdam.
The other similar organisations that are planning for the shift as well are the t. Macquarie
Group, Westpac and National Australia Bank (Smyth, 2018).
As per the discussions conducted in the previous parts, I agree with the statement of the CFR
regarding the minor impact of the Brexit on the operations and resilience of the Australian
Financial Institutions. This is because of the measures taken by government in terms of the
limited Australian funding exposure to UK and other strategic internal measures on lines of
strong strategic coordination and sound liquidity position. Further, the institutions are also
taking the early steps to efficiently address the situation by shifting their trade.

References
Australian Government (2019) Report on the implications of Brexit [online] Available from:
https://treasury.gov.au/sites/default/files/2019-03/CFR_Brexit.pdf [Accessed on:
26/08/2019].
Smyth, J. (2018) Australia’s banks begin relocating functions from London [online]
Available from: https://www.ft.com/content/fa65bbce-db1d-11e8-9f04-38d397e6661c
[Accessed on: 26/08/2019].
The Irish Times (2019) Australia to fast-track UK trade pact in event of no-deal Brexit
[online] Available from: https://www.irishtimes.com/business/economy/australia-to-fast-
track-uk-trade-pact-in-event-of-no-deal-brexit-1.3797105 [Accessed on: 26/08/2019].