UK Treasury Committee clarifies expectations for BoE and FCA’s Brexit analysis

Maria Nikolova

Chair of the Treasury Committee has today written to the Bank and FCA to clarify expectations about the timing and content of the analyses.

As the withdrawal of the UK from the European Union gets closer, the pressure on various institutions to provide information on the potential consequences of Brexit grows. The Bank of England and the Financial Conduct Authority (FCA) are set to produce detailed analyses of the impact of Brexit.

Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, wrote to the Governor of the Bank of England, Chief Executive Officer of the Financial Conduct Authority (FCA) and the Chancellor of the Exchequer in June, asking them to produce and publish an analysis of the impact of the Brexit Withdrawal Agreement and future framework, once it has been negotiated. The Committee asked the three organisations to publish their analyses in good time before Parliament comes to vote on the Brexit deal.

Mrs Morgan has today written to the BoE and FCA to further clarify the Committee’s expectations about the timing and content of this work.

Commenting on the correspondence, Mrs Morgan said:

“The Bank and the FCA should provide analysis of any deal agreed, and of a ‘no deal’ scenario, in the event of a breakdown in negotiations or a parliamentary vote against the Withdrawal Agreement. They should also consider providing analysis for the scenario in which the UK leaves the EU with no trade agreement at the end of a transition period”.

The Committee has appointed Professor Sir Stephen Nickell, former member of the Office for Budget Responsibility’s Budget Responsibility Committee, as a specialist advisor to work on its Brexit inquiry, and specifically to advise on the economic impact of the Withdrawal Agreement. Mrs Morgan has written to the Chancellor to request that Treasury officials will be allowed to engage with Professor Nickell as part of his work.

In addition, Mrs Morgan has asked Mark Carney, Governor of the Bank of England, to provide public clarity on the briefing he gave to Cabinet on September 13th, which was reported as containing a forecast that house prices would fall by a third in a ‘no deal’ scenario.

The correspondence is published a day after the FCA presented a consultation paper on its plans to introduce a temporary permissions regime for inbound firms and funds. The temporary permissions regime will allow EEA firms and funds to continue regulated business in the UK, if the UK leaves the EU in March 2019 without an implementation period in place.

Generally, TP firms – EEA firms passporting into the UK under FSMA, and Treaty firms, who notify the relevant regulator of their wish, will need to continue to comply with the rules which currently apply to them based on the activities they carry on, either in the UK or in their home state.

A temporary permission will last for a maximum of 3 years, and firms will have to notify the FCA that they want a temporary permission. The UK regulator expects to open the notification window in early 2019 and it will close before exit day. Once the notification window has closed, firms that have not submitted a notification will not be able to use the TPR.

In most cases, firms within TPR will be supervised in the same way as other authorised firms Where firms cause harm or pose a significant risk of causing harm, the FCA may use its regulatory tools. For example, the FCA can vary a firm’s permission or impose a requirement.

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