On 27 June 2018, HM Treasury (HMT) published a paper concerning its approach to financial services legislation under the European Union (Withdrawal) Act 2018 (the Act).
Key points in the paper include:
- inbound firms that are currently permitted to operate in the UK without UK authorisation or recognition may plan on the assumption that UK authorisation or recognition will not be needed before the end of the implementation period;
- the Government has confirmed its intention to bring forward a new Bill – the Withdrawal Agreement and Implementation Bill – to give effect to the major elements of the Withdrawal Agreement in UK domestic law;
- HMT, working closely with the FCA and PRA, has undertaken a review of EU and UK domestic financial services legislation to identify deficiencies that will arise when the UK leaves the EU. HMT is drafting statutory instruments to fix these deficiencies and will begin laying these under the Act;
- HMT will be introducing a temporary permissions regime per the announcement made in December 2017. This regime will allow EEA firms to continue operating in the UK for a time-limited period after the UK has left the EU. The regime will provide sufficient time for firms to make an application for full authorisation from the relevant UK regulators;
- in addition to the temporary permissions regime HMT intends to introduce further specific transitional regimes for entities operating cross-border and outside of the passporting framework;
- the UK financial services regulators will be given a general power to phase in post-Brexit requirements, allowing flexibility for firms to transition to the fully domestic UK regulatory framework; and
- information about how HMT proposes to allocate responsibilities between the UK financial services regulators can be found in the draft Financial Regulators’ Powers (Technical Standards) (Amendment etc) (EU Exit) Regulations 2018.
In terms of next steps HMT states:
- that it intends to lay the first financial services on-shoring statutory instruments soon. Among these will be the statutory instruments delivering the temporary permissions regime, the temporary recognition regime for central counterparties and the statutory instrument sub-delegating the power to fix deficiencies in EU binding technical standards and deficiencies in UK regulator rulebooks; and
- further statutory instruments will be laid over the Autumn into early 2019. HMT plans to lay these statutory instruments in groups, with some of the first relating to prudential regulation and capital markets. Drafts of these will be published over the summer to allow for industry engagement.