Administrative and transaction costs arising from Brexit. A regulatory challenge

Brexit opens the way to the negotiation for United Kingdom’s exiting the European Union, and this paper analyses the implications of these negotiations on the regulation of the Internal Market, by considering the possible transformation of the applicable regulations and mechanisms of supervision. The research takes into account the administrative and transaction costs related to the procedure provided by Article 50 of the Treaty on the European Union, because the EU regulatory framework did not rely on a mere exit procedure, but requires a real negotiation. In this context, the timing is a useful data for the actuarial calculations, but the computation of the relevant costs results more complex. Our findings show also an asymmetry (between the interests of UK and the ones of EU) that both weights on the assessment of the incentives pushing in investing in this negotiation, and highlights the risk that one of the parties shall intentionally delay the discussion about any single clause. The analysis focuses on the possibility that, as a result of the exiting, EU financial markets will be exposed to the competitive action of the British regulator, which can implement rules that are less expensive than those recently provided by EU directives and regulations. Consequently, the efficiency of the Brexit requires the safe and sound use of the negotiating opportunities, because a competitive approach (made by the United Kingdom or the European Union) shall not comply with the need for the stability of finance felt by the industry.