The consultancy firm cautioned that the rising popularity of nationalism, evidenced in Donald Trump’s rise to power in the US and Matteo Renzi’s failed referendum in Italy, have created a backdrop against which “emotions threaten to crowd out business logic” during Brexit negotiations.
KPMG bank sales team partner Joe Cassidy said that “this mood has implications for banking and capital markets” as it could spell an end to the global co-ordination of banking regulators seen since the end of the 2008 financial crisis.
“2017 may be the year in which that global regulatory consensus cracks under the weight of these social and political pressures,” he said.
Mr Cassidy said the ideal result for banks in the Eurozone would be to create a capital markets union to preserve the existing financial services supply chain in which London plays a critical role, but research conducted by KPMG found many banking executives feared this may not be the case.
“Banking executives we speak to in the UK fear that the negotiators – on both sides of Brexit talks – could become trapped by ideology or hijacked by emotion, especially if Europe experiences further social and political upheaval in 2017,” he said.
“Even if that doesn’t happen, many in the EU are firm in their opposition to the UK picking and choosing the elements of Europe that it likes ‘à la carte’.”
Regardless of how negotiations turn out, Mr Cassidy said it would be crucial for banks to make Brexit preparations.
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