On 25 July 2019, the Bank of England (BoE) and PRA issued a joint consultation paper which contains:

  • an update on the BoE’s and PRA’s intended use of the temporary transitional power; and
  • proposals to fix deficiencies arising from the UK’s withdrawal from the EU and consequential changes in light of the extension of the Article 50 period.

The maximum possible duration of the use of the temporary transitional power, provided for in legislation, is two years after exit day. This remains unchanged notwithstanding the extension of the Article 50 period. The BoE and PRA previously communicated its view that 15 months would provide an adequate timeframe for firms to prepare and implement the totality of changes to onshore EU legislation. The BoE / PRA state that the extension of the Article 50 period does not change this approach although depending on the date of exit the duration of the directions may need to be modified to align the fixed end date with the closest reporting period. Therefore, the BoE / PRA state that if exit occurs on 31 October 2019, the new fixed end date of the directions would be 31 December 2020. This would provide for a transitional period of 14 months from exit day.

For firms in the temporary permissions regime (TPR) or financial services contracts regime, transitional relief does not apply in most cases. For the limited number of provisions where transitional relief does apply, the BoE / PRA intend to continue the alignment of the maximum duration of TPR transitional relief with that of the overall BoE / PRA transitional relief. In relation to two aspects of third country branch requirements: (i) bank branch profit and loss reporting; and (ii) Solvency II reporting related to the branch minimum capital requirement and solvency capital requirement calculations, the BoE / PRA intend to continue to align the TPR transitional relief with the overall BoE / PRA transitional relief, i.e. ending on 31 December 2020 if the UK leaves the EU on 31 October 2019. The BoE / PRA intend to keep the post-exit duration of other TPR transitional relief periods the same as previously communicated i.e. where a 3 month transitional period is set out this will become 3 months after the 31 October exit day.

The deadline for responding to the joint consultation is 18 September 2019.