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Following the EU Withdrawal Bill officially becoming law, HM Treasury (HMT) published its approach to financial services legislation in the lead up to and immediately following Brexit. In coordination with that publication, the Bank of England and Financial Conduct Authority (FCA) also published their own statements providing further detail on their roles under the proposed approach.
Although all three bodies stress that they are not expecting a “no deal” scenario, it is clear that this is something for which preparations are actively being made.
Interestingly, all three bodies also say that they do not expect firms falling within the scope of the UK regulatory regime to have to start preparing now for any changes. However, in practice, we would expect that most firms are already giving serious thought to their post-Brexit operations.
The main points to take away are as follows:
- It is intended that there will be an “implementation period” between 29 March 2019 and 31 December 2020. During that implementation period, EU financial services legislation will remain in force, the UK will implement any new EU legislation and the UK will remain part of the single market in financial services (which includes being able to make use of any passporting rights).
- Following the expiry of the implementation period, any EU law which is directly applicable in the UK (such as EU regulations) will be converted into UK domestic law. In addition, any UK law which relates to EU membership (such as UK law which implements EU directives) will be retained.
- After the implementation period expires, EU financial services firms will be broadly treated in the same way as other third country firms.
- A temporary permissions regime is planned which would allow EEA firms to continue operating in the UK for a time-limited period post-Brexit. If an EEA firm wishes to operate permanently in the UK post-Brexit then the temporary permissions regime will provide sufficient time for that firm to apply for full UK authorisation.
- Certain supervisory functions which are currently carried out by EU supervisors will be transferred to the FCA or Bank of England (as appropriate) post-Brexit. For example, HMT proposes to transfer the supervision of credit rating agencies and trade repositories to the FCA, and powers in relation to non-UK central counterparties and non-UK central securities depositories to the Bank of England.
- HMT plans to delegate to the FCA and the Bank of England powers to address deficiencies in the current UK regime as a result of Brexit. This will include amending and maintaining any EU technical standards supplementing EU legislation.
HMT intends to start publishing draft financial services legislation related to some of the matters outlined above in Summer 2018. The FCA and the Bank of England also intend to consult in Autumn 2018 on changes that will be needed to the current regulatory guidance and the relevant rulebooks and handbooks to reflect Brexit.
Links to the relevant publications are below:
HM Treasury Paper
Bank of England Statement
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