The Financial Conduct Authority has said that it is planning for a no deal Brexit and is hoping for a transition deal through late 2020.
The FCA has said that the UK and EU’s regulations could evolve post-Brexit, but that both entities should have access to each other’s markets.
The government has already said that EU firms planning to access the London market will be granted temporary permissions to operate in order to soften the blow of having to seek new regulatory approval.
Nausicaa Delfas, executive director of international at the FCA, said that the watchdog is working on establishing a temporary permissions regime which will allow for ‘business as usual’ for EU firms operating in the UK.
“The TPR will allow for business as usual for EEA firms and funds passporting into the UK,” said Delfas.
“As at April this year, more than 8,500 financial services firms were registered as passporting into the UK, and nearly 6,000 out of the UK. Those that receive a temporary permission will be able to enter into new business and fulfil existing contracts with UK customers for a defined period after exit day, while seeking full authorisation.”
UK financial firms that are expanding their operations to the EU were warned that they should remain answerable to British watchdogs. Delfas said that UK financial firms who have new EU structures must make sure that they don’t obstruct the oversight of UK businesses by UK regulators.
“Firms need to maintain threshold conditions and our rules,” Delfas warned firms.
“If you are expanding your presence in Europe, the structures you put in place must enable us to supervise your UK business effectively, and ensure that you continue to meet our threshold conditions.”
The EU Withdrawal Act will mean that, after March 2019, EU law will be converted into UK law and UK laws that implement EU obligations will be maintained. The so-called equivalence will aim to ensure ‘continuity and certainty’ and a smooth transition.
“Now this Bill has received Royal Assent, existing EU legislation will be converted into UK law after March 2019, and UK laws which implement EU obligations will be preserved,” Delfas said.
“The aim is that, as far as possible, to ensure continuity and certainty, the same rules and laws will apply after exit day as they did the day before. Common outcomes should be the criteria by which we judge one another’s regulatory position, and thus the access that we are prepared to grant to one another’s markets. What matters more is not what road we take, but what that final destination is – and as long as the UK and the EU maintain a commitment to protecting consumers and to strong, open markets, there is no reason this cannot work in practice.”
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