On 16 July 2018, there was published on the legislation.gov.uk website a draft version of The Financial Regulators’ Powers (Technical Standards) (Amendment etc) (EU Exit) Regulations 2018, together with a draft explanatory memorandum.
The draft Regulation is being made using the power in section 8 and schedule 4 of the European Union (Withdrawal) Act 2018 in order to address failures of retained EU law to operate effectively following the withdrawal of the United Kingdom from the European Union.
The draft Regulation amends:
- sections 1A, 1B, 2AB and 2J of the Financial Services and Markets Act 2000 (FSMA), to ensure that the functions of the FCA and the PRA include the function of making EU Exit Instruments under the draft Regulation, and that the function of making technical standards is one of their general functions;
- part 9A of the FSMA by inserting sections 138P to 138S to set out the procedure for standards instruments, which will enable the FCA, the PRA and the Bank of England to make technical standards post exit;
- the Financial Services (Banking Reform) Act 2013 (the 2013 Act) by inserting new sections 97A to 97D (and making consequential amendments to section 39(10) and 71 of the 2013 Act) to make the same provisions as above for the Payment Systems Regulator (PSR); and
- schedule 4 to the 2013 Act to provide for the way in which the PSR’s functions are to be funded.
Part 1 of the Schedule to the draft Regulation sets out the EU legislation for which the FCA is the appropriate regulator. This includes certain Commission Delegated Regulations made under the:
- Alternative Investment Funds Managers Directive;
- Credit Rating Agencies Regulation;
- European Markets Infrastructure Regulation;
- European Social Entrepreneurship Fund Regulation;
- European Venture Capital Funds Regulation;
- Market Abuse Regulation;
- Insurance Distribution Directive;
- Markets in Financial Instruments Directive (recast);
- Markets in Financial Instruments Regulation;
- Mortgage Credit Directive;
- Packaged Retail and Insurance-Based Investment Products Regulation;
- Payment Services Directive (recast);
- Prospectus Directive;
- Short Selling Regulation;
- Transparency Directive; and
- UCITS Directive.
Part 2 of the Schedule to the draft Regulation sets out the EU legislation for which the PRA is the appropriate regulator. This includes certain Commission Delegated Regulations made under the:
- Capital Requirements Directive IV;
- Capital Requirements Regulation;
- Central Securities Depositories Regulation;
- Institutions for Occupational Pension Provision Directive; and
- Solvency II Directive.
Part 3 of the Schedule to the draft Regulation sets out the EU legislation for which the Bank of England is the appropriate regulator. This includes certain Commission Delegated Regulations made under the:
- Bank Recovery and Resolution Directive;
- Central Securities Depositories Regulation; and
- European Markets Infrastructure Regulation.
Part 4 of the Schedule to the draft Regulation sets out the EU legislation for which both the PRA and FCA are the appropriate regulators. This includes certain Commission Delegated Regulations made under the:
- Bank Recovery and Resolution Directive;
- Capital Requirements Directive IV;
- Capital Requirements Regulation;
- European Markets Infrastructure Regulation;
- Financial Conglomerates Directive; and
- Markets in Financial Instruments Directive (recast).
Part 5 of the Schedule to the draft Regulation sets out the EU legislation for which both the Bank of England and FCA are the appropriate regulators. This includes certain Commission Delegated Regulations made under the:
- Markets in Financial Instruments Regulation; and
- European Markets Infrastructure Regulation.
Part 6 of the Schedule to the draft Regulation covers a certain Commission Delegated Regulation under the Interchange Fee Regulation for which the PSR will be responsible.
The explanatory memorandum to the draft Regulation notes at para 7.10 that HM Treasury would be required to approve the instruments that the UK regulators use to make or amend technical standards after Brexit. But the HM Treasury approval function would only be used to refuse to approve a proposed change to a technical standard if it appeared to HM Treasury that a proposed technical standard would have implications for public funds, or would prejudice any negotiations for an international agreement.
The draft Regulation will come into force on the day after the day on which it is made.