FCA keeps preparing for all Brexit scenarios
Whereas the UK regulator has put in place transitional regimes for EEA firms, the situation for UK firms in the EU is not the same, says Nausicaa Delfas, FCA’s Executive Director of International.
The UK Financial Conduct Authority (FCA) continues to prepare for all Brexit scenarios, says Nausicaa Delfas, FCA’s Executive Director of International.
Ms Delfas noted that UK Government has been clear that the transition period is set to end on December 31, 2020.
The FCA has put in place transitional regimes, or ‘Temporary Permissions Regimes’, so that EEA firms and funds, which are currently doing business from the EU into the UK through passporting, can continue to have access to UK markets at the end of the Transition Period.
The UK regulators have been working on onshoring EU rules into the UK rules and legislation. To date, the Treasury has laid 62 Statutory Instruments, and the FCA has published 1808 pages of rules. The FCA continues with this process during this year, with new instruments such as EMIR 2.2 and amendments to EU prospectus, money laundering and low carbon benchmarks legislation to be onshored in the coming months.
To help firms adapt to this new regime, the FCA will make use of the power that the Treasury has given it to waive or modify new rules, the so-called ‘Temporary Transitional Power (TTP)’. This means that, up to March 31, 2022, firms will generally not need to prepare now to meet the changes to their UK regulatory obligations resulting from onshoring.
The FCA will use the flexibility it provides to apply it widely to a broad number of rules, although it is important firms realise that there are necessarily some exceptions. FCA’s use of the TTP will minimise the risks of disruption due to firms’ adjustments to the new UK regime and ensure that consumers remain appropriately protected.
Ms Delfas stressed that there are some Brexit related risks which need multilateral or reciprocal action.
First, there are issues that could be resolved through reciprocal equivalence (such as the overlapping UK and EU share and derivatives trading obligations). Second, there are issues that cannot be resolved through equivalence, including broader contract continuity issues and the continued provision of retail financial services by UK firms to EU consumers.
Whereas the FCA has put in place transitional regimes for EEA firms, the situation for UK firms in the EU is not the same. Their continued operations after the end of the transition period will depend on the regulatory regimes of individual EU member states. Although many of these member states had put in place temporary transitional regimes in the event of a ‘no-deal’ exit, the majority of these have now lapsed, Ms Delfas says.
So firms should continue to consider what actions they need to take to be ready for the end of the transition period, and what this will mean for their customers.
The Political Declaration last year, which sets out the ambition driving a future EU-UK relationship, commits both parties to assessing each other for equivalence by end-June 2020, across all relevant EU and onshored legislations, Ms Delfas explained. She added that the FCA continues to work closely with the Treasury on this issue.
The FCA has publicly called for equivalence assessments to be done on an ‘outcomes basis’, in line with the EU’s stated approach, that is, that each country’s rules and supervision lead to equivalent outcomes, rather than needing to be identical.