On 28 March 2018, the Bank of England (BoE) published a news release providing an update on the regulatory approach to preparations for EU withdrawal.

The BoE welcomes the agreement between the UK and the EU27 that there should be an implementation period until the end of 2020 as part of the UK’s Withdrawal Agreement with the EU.

The BoE also states that it considers it reasonable for firms currently carrying on regulated activities in the UK by means of passporting rights, or the EU framework for central counterparties (CCPs), to plan that they will be able to continue undertaking these activities during the implementation period in much the same way as now. The BoE also made clear that firms may plan on the assumption that UK authorisation or recognition will only be needed by the end of the implementation period.

The BoE also states that in the context of their future preparations for the UK’s withdrawal from the EU, EEA banks and insurers may (if they are not conducting material retail business) apply for authorisation to operate as a branch in the UK.

The BoE also notes that the UK Government has committed to bring forward legislation, if necessary, to create a temporary permission regime to allow firms to continue their activities in the UK for a limited period after withdrawal. It adds that in the unlikely event the Withdrawal Agreement is not ratified, this provides confidence that a back-stop will be available.


The BoE has also published a letter from Sam Woods (Deputy Governor, BoE and CEO of the PRA) to banks and insurers and a letter from Sir Jon Cunliffe (Deputy Governor, Financial Stability, BoE) to CCPs making the same points.

Policy Statement

The BoE has published Policy Statement 3/18: International banks: the PRA’s approach to branch authorisation and supervision (PS3/18).  In PS3/18 the PRA provides feedback on responses to ‘Consultation Paper 29/17: International banks: the PRA’s approach to branch authorisation and supervision’ (CP29/17).

The PRA reports that it has not made any material changes to the proposals as set out in CP29/17. However, in PS3/18 the PRA provides further discussion as regards its approach to significant retail activities (paras 2.4 to 2.11) and systemic wholesale branches (paras 2.19 to 2.24).

The approach set out in PS3/18 comes into effect from 29 March 2018. For EEA firms currently branching into the UK under passporting arrangements and intending to apply for PRA authorisation in order to continue operating in the UK after the UK’s withdrawal from the EU, this approach will be relevant to their authorisation application.

The PRA also states that on the basis of existing business and structures and the current degree of supervisability, it does not expect the new approach to affect any of the non-EEA international banks currently authorised to operate in the UK through branches.

Supervisory Statement

The PRA has also published Supervisory Statement 1/18: International banks: the PRA’s approach to branch authorisation and supervision (SS1/18). SS1/18 accompanies PS3/18 and summarises the PRA’s approach to international banking supervision, and clarifies how the PRA will authorise and supervise internationally headquartered banking groups that branch into the UK, with a specific focus on branches undertaking wholesale banking activities in the UK.

SS1/18 is structured as follows:

  • Chapter 2 provides an overview of international banks in the UK and the distinction between their legal forms;
  • Chapter 3 sets out the PRA’s general approach to branch authorisation and supervision, including how the PRA assesses the supervisability of international banks operating in the UK through branches;
  • Chapter 4 sets out the PRA’s approach to authorising and supervising international bank branches that propose to accept significant retail and small-company Financial Services Compensation Scheme (FSCS) covered transactional deposits, or total covered deposits that could give rise to a material call on the FSCS; and
  • Chapter 5 sets out the PRA’s approach to authorising and supervising systemic wholesale branches. This focuses on ensuring the PRA has an appropriate degree of influence and visibility over the supervisory outcomes for the firm as a whole and the wider group, so far as relevant to the safety and soundness of the firm and necessary to meet the PRA’s objectives.


The FCA has published a statement on the EU withdrawal following the March European Council.

The FCA also welcomes the agreement reached on the terms of the implementation period that will apply following the UK’s withdrawal from the EU.

The statement also covers the temporary permissions regime for firms and funds passporting into the UK. The FCA states: “Subject to HM Government’s legislation setting up the regime, our expectation is that firms and funds that will be solo-regulated by the FCA will need to notify us of their desire to benefit from the regime. Notification will not require submission of an application for authorisation. We will set out further details on these proposals later in the year.”

The FCA also states that the implementation period would permit firms and funds to continue to benefit from passporting between the UK and EEA until the end of December 2020. UK firms and funds passporting into the EEA should discuss with their relevant EU regulator the implications of a implementation period for their contingency planning.

The FCA has also published a speech by its Chief Executive, Andrew Bailey. In his speech Mr Bailey explains why an implementation period is important for everyone involved in financial services on both sides and what needs to be done to make the best use of that time. He then offers a few thoughts on the end-state relationship between the UK and the EU. Among other things he states: “I am encouraged that I see progress in establishing an understanding that it is possible to have a free trade agreement that encompasses financial services. And it is possible to embed the public interest in financial stability and consumer protection in such an agreement.”