On 23 January 2019, HM Treasury published a letter from the Economic Secretary to the Treasury, John Glen MP, providing detail on the proposal for a temporary transitional power for the Bank of England, PRA and FCA. The transitional power is set out in Part 7 of The Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019, a copy of which is annexed to the letter. The transitional power supplements approved Brexit arrangements, including the temporary permissions regime (TPR).
The letter details that the transitional power would allow the UK regulators to delay, or phase in, regulatory requirements where they either change as a result of Brexit, or apply to firms for the first time, in the event of a no deal Brexit scenario. This does not allow regulators to change end-state requirements approved in legislation under the EU (Withdrawal) Act 2018. The transitional power would be used by the UK regulators for a period of up to 2 years from exit day. If requirements are delayed by the transitional power, the regulators must specify a temporary requirement that firms must meet in the interim (generally expected to be the existing EU standard in most cases).
The transitional power is limited to the requirements for which the regulators are respectively responsible for supervising – this means requirements e.g. data protection requirements, would be out of the scope of the transitional power. The transitional power can only be applied to prevent or mitigate disruption to financial services firms as set out in statute, and will be used in conjunction with the TPR to ensure that the UK regulators can flexibly assist firms in gradually transitioning to new UK requirements. Directions made by the UK regulators in relation to requirements must be made in a transparent way, and the Letter sets out the requirements for such directions.
Before the final provisions on the transitional power are laid before Parliament, the Economic Secretary to the Treasury is seeking views from the Treasury Select Committee on the transitional power.