On 31 October 2018, HM Treasury published a draft version of the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2018 together with a draft explanatory memorandum.

The draft Regulations form part of a series of draft statutory instruments that HM Treasury is publishing as part of its contingency planning for a no-deal Brexit. The statutory instruments are made by HM Treasury in exercise of its powers conferred by the European Union (Withdrawal) Act 2018.

The draft Regulations make amendments to retained EU law related to financial market infrastructure insolvency to ensure that the legal framework can operate effectively in a UK context once the UK leaves the EU in any scenario.

Specifically:

• Part 2 of the draft Regulations makes changes to both Part 7 of the Companies Act 1989 and Banking Act 2009. These are technical fixes such as clarifying the scope of these provisions and the removal of references to EU legislation replacing with UK equivalents;
• Part 3 of the draft Regulations introduces amendments to the Settlement Finality Regulations (SFR), the Financial Collateral Arrangements Regulations and existing UK financial markets and insolvency regulations. The majority of these changes confirm the scope of this legislation and remove EU references. In particular for the SFR, the scope of the existing UK legislation is being amended to include systems not governed by UK law and central banks outside the UK. These non-UK systems will be able to apply to the Bank of England (BoE) for designation under the SFR, under broadly the same criteria as UK systems;
• Part 4 of the draft Regulations confirms that any system that has SFR protections at the point of the UK’s exit from the EU will continue to receive these protections under UK law after exit day. These systems will not have to reapply for designation from the BoE; and
• Part 5 of the draft Regulations allow EEA systems that benefit from UK protections under the EU Settlement Finality Directive before exit day to continue to do so after exit day on a temporary basis whilst their full application is considered by the BoE. These systems will be required to notify the BoE before exit day to enter the regime. After exit day, these systems will have 6 months to make a full application under the SFR to continue to benefit from SFR protections.