On 28 November 2018, HM Treasury published a policy note on The Financial Services (Implementation of Legislation) Bill (the Bill).

HM Treasury is currently working on an ‘onshoring project’, which will see around 60 statutory instruments (SIs) made under the European Union (Withdrawal) Act 2018 (EUWA) to ensure a functioning financial services regime at the point where the UK leaves the EU. These SIs amend existing EU financial services legislation that will be transferred onto the UK statute book by the EUWA, and related domestic legislation, to ensure that it continues to function effectively after the UK leaves the EU. However, the EUWA onshores EU law that is operative before exit day, it does not onshore EU legislation that is not yet in force or not yet applicable.

The Bill consists of one substantive clause which will allow the Government to implement aspects of key pieces of EU financial services legislation known as ‘in-flight files’. These have either: (i) been published in the Official Journal of the EU (OJ), but are not operative immediately before exit day and so are not transferred onto the UK statute book by the EUWA, or are operative but reliant on non-operative clauses, and so have not been transferred onto the UK statute books by the onshoring process; or (ii) are currently in negotiation, and may enter into the OJ up to two years after the UK leaves the EU. Only those ‘in-flight files’ considered necessary for UK financial services following exit are within the scope of the power. The Bill contains a number of safeguards including a sunsetting power to 2 years after exit day.

In addition to providing a summary of the Bill the policy note specifically discusses:

• Articles 6 and 7 of the Central Securities Depositories Regulation and the Delegated Cash Penalties Regulation;
• Articles 37 and 38(2) of the Markets in Financial Instruments Regulation;
• The provisions of the Prospectus Regulation that apply from 21 July 2019; and
• Article 4(1) of the Securities Financing Transactions Regulation.

The schedule to the Bill contains proposals for EU financial services legislation that are currently in negotiation, and could enter into the OJ up to two years post-exit, that the UK may wish to implement. The Bill makes provision for the Government to choose to implement only those EU files, or parts of those files, which it deems beneficial to the UK, and to adjust the legislation as it is brought into UK law to ensure that it works best for UK markets. Such EU files relate to the following draft EU legislation and initiatives:

• Capital Requirements Regulation II and Capital Requirements Directive V;
• Bank Recovery and Resolution Directive II;
• Central Counterparty Recovery and Resolution Regulation;
• European Market Infrastructure Regulation (Regulatory Fitness and Performance) (EMIR Refit);
• European Market Infrastructure Regulation 2.2;
• Investment Firms Review (prudential framework);
• Cross-Border Distribution of Funds Regulation & Directive;
• Covered Bonds Regulation and Directive;
• Low carbon benchmarks;
• SME Growth Markets Regulation; and
• European Supervisory Authority review.