On 27 June 2018 the Bank of England (the “BofE”) issued its approach (the “Approach”) to financial services legislation in preparation for Brexit. The Approach was released alongside a statement by the FCA in response to HM Treasury’s approach to financial services legislation under the European Union (Withdrawal) Act (the “Act”). The Approach sets out how the BofE intends to consult and work with the Financial Conduct Authority (“FCA”) on onshoring EU Binding Technical Standards (“BTS”) – BTSs are detailed legal acts which specify particular aspects of EU legislation (i.e. Directives or Regulations) and aim at ensuring harmonisation throughout specific areas of legislation such as the financial services – into the UK in autumn of this year as a contingency against a ‘no deal’ happening ie. there will be no implementation period of the UK’s withdrawal from the EU and the UK will leave the EU on 29 March 2019.
For further background on the potential impact of Brexit and the potential outcomes on the financial services industry, please see our newsletter published earlier in the year, available here.
HM Treasury has confirmed that it is bringing forward legislation under the Act to create temporary permissions and recognition regimes that will ensure firms, including non-UK counterparties have minimal disruption to their business activities when the UK leaves the EU. Moreover, HM Treasury intends to delegate powers to financial service regulators such as the BofE, FCA, PRA and the Payment Systems Regulators (the “Regulators”) who will be required to monitor and make the necessary changes to on-shoring BTSs in the UK.
The BofE plans to make these changes by laying Statutory Instruments (“SIs”) before Parliament to allow firms to review and comment on any of the proposed amendments to BTS and any resulting changes to the Regulators’ rulebooks. These changes would only come into force if an implementation period has not been agreed upon and therefore, firms are not expected to prepare to implement any of the proposed changes at present as transitional relief will be granted, meaning firms will have sufficient time to comply with any of the changes.
If the implementation period does take effect on the 29 March 2019, the UK will continue to be treated as part of the EU’s single market in financial services as usual, meaning firms will still be expected to comply with EU law as they do now. The implementation period will apply from 29 March 2019 until 31 December 2020 and UK firms will be expected to follow any new EU legislation that arises during this period. Firms and other regulated entities should therefore continue ‘business as usual’ as in the scenario where an implementation period has not agreed upon, firms will have time to comply.
To view the Bank of England’s Approach please click here.
To view the HM Treasury’s approach to financial services legislation under the Act please click here.
For more information, and any guidance or advice on the impact of Brexit on your firm, Cleveland & Co External in-house counsel, your specialist outsourced legal team,are here to help.