On 23 June 2016, Britain voted to leave the EU, and the Brexit negotiations between the UK and the EU are currently ongoing.
Participants in the global financial markets are facing great uncertainty about what impact Brexit will have on the European financial system and particularly, the UK financial services sector and its capital markets. It has been argued that Brexit will result in losses of business for the UK-based financial firms, reduction of the human capital pool for the UK financial services sector, loss of competitiveness of the City of London as an international financial centre, and foreseeable higher costs of doing business for both UK and European financial firms due to amendments of regulations and the construction of new financial infrastructures within the EU.
However, Brexit may also provide new opportunities to the UK financial sector. For example, leaving the EU may set the UK financial sector free to establish business with other markets outside the EU, such as the US, the Middle East, and Asian emerging markets, which may reinforce the importance of the UK financial service sector in the global financial system.
Overall, there are uncertainties surrounding what the new relationship between the UK and the EU will look like after Brexit. Brexit not only challenges practitioners, but also brings about many academic questions, which include, for example:
(1) Given that the UK is the most representative market-orientated financial system in the EU, whilst the EU is, in general, a banking-orientated one, how will the EU develop its capital markets without the participation of the UK financial sector?
(2) What will be the changes in the models of risk management for banks, funds, insurance companies, and other asset management firms after Brexit in both the UK and the EU?
(3) How do different elements of the financial system in both the UK and the EU respond to events related to Brexit? These elements include the stock market, the bond market, the derivatives market, the foreign exchange market, and the real estate market, etc.
(4) What are the relocation patterns of corporate headquarters of firms in the financial sector from the UK to the EU countries and to the rest of the world, and vice versa?
(5) How does the labour market re-adjust itself in response to the changes in the demand and the supply of talents in the financial sector in both the UK and the EU, including the pay for executives and employees?
This Special Issue will provide a good opportunity for researchers in financial economics to examine questions related to the above-mentioned areas. In addition, studies on other subtopics that are relevant to Brexit and its impact on financial systems will also be considered.
Dr. Hong Bo Prof. Dr. Ansgar Belke Guest Editors
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