The following posts provide a snapshot of selected UK, EU and global wholesale financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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Bank of England Consults on Revisions to Statement of Policy on Enforcement
04/15/2024
On March 28, 2024, the Bank of England published a consultation paper on revisions to its Statement of Policy and Procedure on its approach to enforcement, published in January 2024, to reflect enhancements to the BoE's enforcement powers granted under the Financial Services and Markets Act 2023.
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HM Treasury Publishes Policy Statement on Next Phase of Smarter Financial Services Regulatory Framework
03/21/2024
On March 21, 2024, HM Treasury published a paper on the next phase of its Smarter Financial Services Regulatory Framework, the U.K.’s program of post-Brexit regulatory reforms for financial services. The original policy statement on the smarter regulatory framework was published in December 2022 as part of the so-called Edinburgh Reforms (discussed in our client note, “UK Government Publishes Edinburgh Reforms for Financial Services”). This described the U.K.'s new model for regulation and set out how the U.K. would prioritize the repeal and reform of retained EU law for financial services. In July 2023, HM Treasury published a further policy statement, dividing the review of REUL into tranches, and detailing anticipated dates for reform. Further details of the U.K.'s future financial regulatory framework can be found on our website, Future of Financial Services Regulation in the UK.
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UK Conduct Authority Consults on New Approach to Enforcement and Publication of Enforcement Investigations
02/27/2024
On February 27, 2024, the U.K. Financial Conduct Authority published a consultation on revisions to its Enforcement Guide, setting out proposals which aim to simplify the guidance and increase transparency around the FCA's enforcement actions. Responses to the consultation may be submitted until April 30, 2024.
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Fourth Commencement Regulations Under Financial Services and Markets Act 2023 Published
01/18/2024
The Fourth Commencement Regulations - the Financial Services and Markets Act 2023 (Commencement No. 4 and Transitional and Saving Provisions) (Amendment) Regulations 2023 - under the Financial Services and Markets Act 2023 were made on December 14, 2023. The Fourth Commencement Regulations provide, among other things, for:- The repeal of HM Treasury’s obligation to review legislation in various financial services legislation, including but not limited to, the Short Selling Regulation, the Securitization Regulation, the Alternative Investment Fund Managers Regulations and the U.K. version of the European Market Infrastructure Regulation. These repeals took effect on December 15, 2023.
- The revocation from April 5, 2024 of the Data Reporting Services Regulations 2017 and related implementing legislation such as (i) the provisions in the onshored Markets in Financial Instruments Regulations that provide HM Treasury and the regulators with powers to specify further detail relating to data reporting services; and (ii) the provisions in the MiFIR Delegated Regulation on the provision of data on reasonable commercial basis. The revocation of these provisions on this date aligns with HM Treasury's aim of the draft Data Reporting Services Regulations 2023 entering into force on April 5, 2024. The draft Data Reporting Services Regulations 2023 will replace the Data Reporting Services Regulations 2017, restating with modifications some of the 2017 content. The FCA has confirmed the final framework for a consolidated tape for bonds, which will also enter into force on April 5, 2024.
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UK Financial Conduct Authority Publishes Rule Review Framework
01/16/2024
The U.K. Financial Conduct Authority has published its Rule Review Framework, setting out how it will set, measure and monitor the outcomes of its Handbook rules. The Rule Review Framework was mandated under the Financial Services and Markets Act 2023 (discussed in our client note, A Boost for UK Financial Services). The FSM Act 2023 transferred responsibility for making detailed rules to the U.K.'s regulators, significantly increasing their powers. To ensure proper oversight of the use of those powers, the FSM Act 2023 provides for an enhanced regulatory accountability framework, which includes requiring the FCA (and the Prudential Regulation Authority, which consulted on its proposed in 2023) to keep their rules under review and publish a statement of policy on how they conduct those reviews.
Read more.ATTORNEYS: Thomas Donegan, Chloe Barrowman
TOPICS : Brexit for Financial Services, Financial Services -
Retained EU Law and EU Interpretive Principles Revoked from UK Statute Book
01/03/2024
The Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendment) Regulations 2023 (with related Explanatory Memorandum) came into force on January 1, 2024, clarifying that certain changes provided for under the Retained EU Law (Revocation and Reform) Act 2023 have come into effect.
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First Commencement Regulations under UK's REUL Act Published
12/12/2023
The Retained EU Law (Revocation and Reform) Act 2023 (Commencement No. 1) Regulations 2023 were made on December 12, 2023. These Regulations brought into force from January 1, 2024, provisions of the Retained EU Law (Revocation and Reform) Act to the effect that:- From January 1, 2024, the legislation set out in Schedule 1 of the REUL Act 2023 is revoked. The revocation of financial services legislation is being implemented under the Financial Services and Markets Act 2023.
- All remaining references to “retained EU law” (and related terms) are replaced with the term "assimilated law" (or a similar term). Assimilated law is U.K. law that was previously retained EU law or "REUL". The REUL Act provides that from January 1, 2024, REUL (and related terms) will be known as assimilated law.
- References to the recognition of EU rights that were retained under the European Union (Withdrawal) Act 2018 are removed. The REUL Act repealed the principle of the supremacy of EU law from January 1, 2024, meaning there is no supremacy for assimilated law over other pieces of U.K. statute.
- References to general principles of EU law (established by the Court of Justice of the European Union) are removed.
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Draft Legislation Published for Implementing UK's Retained EU Law (Revocation and Reform) Act 2023
10/20/2023
The draft Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendment) Regulations 2023, laid before Parliament on October 16, 2023, will implement certain aspects of the Retained EU Law (Revocation and Reform) Act 2023 (which we discuss in our client note, "UK Government Publishes Brexit Freedoms Bill Setting Deadline for Revocation of EU Law"). The aim of the draft Regulations is to provide enhanced legal certainty in U.K. statutes.
The draft Regulations make provision for amending U.K. primary legislation (listed in the schedule to the draft Regulations) by replacing references to "retained EU law" with the term "assimilated law." This implements section 5 of the REUL Act, which provides that in-force REUL will become "assimilated law" or "assimilated case law" from January 1, 2024.
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Revocation of the Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 is Postponed
09/14/2023
The Financial Services and Markets Act 2023 (Commencement No. 3) (Amendment) Regulations 2023 were made on August 25, 2023, postponing the revocation of the Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013.
The Commencement No. 3 Regulations amend the Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023, which were made on July 10, 2023 and provide for the entry into force of certain provisions of the Financial Services and Markets Act 2023 (which we discuss in our client note, A Boost for UK Financial Services: The UK Financial Services and Markets Act 2023). This included provisions revoking retained EU legislation relating to financial services, including the CITS Regulations. The CITS Regulations establish a fund vehicle for the U.K. investment management industry which makes U.K. domiciled funds for collective investment in transferable securities more competitive. The CITS Regulations will now be revoked on a day appointed by the Treasury in a later instrument.ATTORNEYS: Thomas Donegan, Chloe Barrowman
TOPICS : Brexit for Financial Services, Financial Services, Funds -
HM Treasury Publishes Response to Payments Regulation and Systemic Perimeter Consultation
08/14/2023
HM Treasury has published a response to its consultation on payments regulation and the systemic perimeter. The consultation was prompted by the U.K. government's Payments Landscape Review and HM Treasury's concern that some payments services operators were not subject to systemic supervision but may pose systemic risks to the U.K. financial system.
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UK Financial Conduct Authority Consults on Securitization Rules
08/14/2023
The U.K. Financial Conduct Authority is consulting on its proposed rules for securitization markets, which will replace many of the firm-facing requirements under the existing U.K. Securitization Regulation. The U.K. Prudential Regulation Authority is separately consulting on its own equivalent rules for PRA-authorized firms, which together with the FCA's rules will create a coherent regime for securitizations. The regulators are being handed the power to make these rules under HM Treasury's proposed reforms to the U.K. securitization regime, which will repeal the existing U.K. Securitization Regulation, keeping part of the regime in new legislation and the remainder in the regulators' rulebooks.
Read moreATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Brexit for Financial Services, Securities -
HM Treasury Consults on First Financial Market Infrastructure Sandbox – the Digital Securities Sandbox
08/07/2023
HM Treasury has published a consultation on the establishment of a financial market infrastructure sandbox, known as the Digital Securities Sandbox. The sandbox will be established using new powers granted by the U.K. Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for UK Financial Services"), empowering HM Treasury to set up individual FMI sandboxes. The sandboxes are designed to enhance understanding of the use cases for emerging digital asset technologies, including distributed ledger technology. HM Treasury can modify or disapply legislation and rules within the sandbox to permit different technologies to be tested that would not be possible under the existing legislative and regulatory framework, with the potential to make permanent changes to legislation based on the findings of the sandbox.
Read more.ATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Brexit for Financial Services, Financial Market Infrastructure, FinTech, Securities -
HM Treasury Publishes Response on UK Retail Disclosure Consultation
08/07/2023
HM Treasury has published a response to its consultation on the future of U.K. retail disclosures. HM Treasury's consultation (which we discussed in our client note, "UK Government Publishes Edinburgh Reforms for Financial Services") identified various problems with the Packaged Retail and Insurance-Based Investment Products Regulation which currently governs disclosures for complex retail investment products. These included that the PRIIPs regime could be overly prescriptive and potentially misleading in its attempts to make PRIIPs products comparable and that the rules were spread across a mixture of legislation and regulatory rules which led to a complex environment for firms.
Read more.ATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Brexit for Financial Services, Consumer Protection, Securities -
HM Treasury Consults on UK Future of Payments Review
08/04/2023
HM Treasury has published a Call for Input on the U.K. Future of Payments Review, an investigation into how future payments are likely to be made and how the U.K. can offer world-leading retail payments. The review is focused on consumer needs — specifically, those of individuals and businesses processing retail payments. Input is sought on the following issues:- What are the most important consumer retail payment journeys, both today and in the next five years?
- How does the experience of these journeys by U.K. consumers (individuals and businesses) compare with those of other leading countries?
- How likely are the existing plans and initiatives across the payments landscape to deliver world-leading payment journeys for U.K. consumers?
ATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Brexit for Financial Services, Consumer Protection, Payment Services -
UK Government Consults on Revised Securitization Regime
08/04/2023
HM Treasury has published a near-final draft statutory instrument and related Policy Note setting out its proposed reforms to the U.K. securitization regime. Comments on the draft S.I. can be submitted until August 21, 2023. The final S.I. will be laid before Parliament before the end of 2023.
The PRA is separately consulting on proposed rules to replace its retained EU law securitization requirements for PRA-authorized firms. Responses to the PRA's consultation should be submitted by October 30, 2023. The FCA will publish a consultation on its securitization rules on August 7, 2023.
Read moreATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Brexit for Financial Services, Securities -
UK Regulator Issues Statement on New Growth and International Competitiveness Objective
08/03/2023
The U.K. Financial Conduct Authority has published a statement setting out how its work to support the 'key drivers' of productivity will facilitate delivery of its new secondary objective and how it intends to report on progress embedding the new objective. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023") introduces a new secondary statutory objective, obliging the FCA and U.K. Prudential Regulation Authority in carrying out their functions to support the long-term growth and international competitiveness of the U.K.'s economy in the medium and long term. This obligation enters into force on August 29, 2023, under Commencement Regulations made on July 10, 2023. Each regulator must report at two intervals to HM Treasury setting out how it has complied with its duty to advance the new objective. The reports are due 12 and 24 months after the new objective applies (August 29, 2024 and August 29, 2025 respectively).ATTORNEYS: Barnabas W.B. Reynolds, Sandy Collins
TOPICS : Brexit for Financial Services, Financial Services -
UK Regulator Proposes Framework for a Consolidated Tape
08/03/2023
On July 5, 2023, the U.K. Financial Conduct Authority launched a consultation on a proposed U.K. consolidated tape for bonds. MiFID II introduced requirements for a "consolidated tape" for transactions in equity and non-equity instruments. It requires a consolidated tape provider to collect post-trade information published by trading venues and approved publication arrangements and to consolidate this into a continuous live data stream made available to the public. No consolidated tape has yet been set up in either the U.K. or the EU. The EU announced at the end of June 2023 that political agreement had been reached on the proposals to introduce an EU consolidated tape.
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First Commencement Regulations Under UK Financial Services and Markets Act 2023
08/03/2023
The Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023 were made on July 10, 2023 and will bring into force provisions under the Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023") from either July 11, 2023, August 29, 2023 or January 1, 2024.
Read moreATTORNEYS: Barnabas W.B. Reynolds, Sandy Collins
TOPICS : Brexit for Financial Services, Financial Services -
UK Government Sets Out Plan for Revoking EU Financial Services Laws
08/02/2023
Following finalization of the Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023"), HM Treasury published a Delivery Plan for the Building a Smarter Financial Services Regulatory Framework for the UK. The Delivery Plan compliments the Policy Paper published as part of the Edinburgh Reforms (discussed in our client note, "UK Government Publishes Edinburgh Reforms for Financial Services").
Read moreATTORNEYS: Barnabas W.B. Reynolds, Sandy Collins
TOPICS : Brexit for Financial Services, Financial Services -
UK Prudential Regulation Authority Consults on Approach to Reviewing Rules
08/02/2023
The U.K. Prudential Regulation Authority opened a consultation on June 30, 2023, on its proposed approach to reviewing its rules, including a proposed statement of policy. The Financial Services and Markets Act 2023 transfers responsibility for making detailed rules to the U.K.'s regulators, significantly increasing their powers, and provides for an enhanced regulatory accountability framework, subjecting the regulators to additional oversight by Parliament and HM Treasury. One of those regulatory accountability measures requires the PRA and Financial Conduct Authority to keep their rules under review and to publish a statement of policy on how they conduct such reviews.
The PRA's consultation sets out its proposed framework for conducting rule reviews, stakeholder engagements, transparency and communicating the outcomes of reviews. Responses to the consultation may be submitted until September 29, 2023.
The FCA has also published a draft Rule Review Framework, for which feedback may be submitted until September 15, 2023.ATTORNEYS: Barnabas W.B. Reynolds, Sandy Collins
TOPICS : Brexit for Financial Services, Financial Services -
UK Financial Conduct Authority Seeks Comment on Draft Rule Review Framework
08/02/2023
The U.K. Financial Conduct Authority launched a consultation on July 14, 2023, on its proposed Rule Review Framework. The Financial Services and Markets Act 2023 transfers responsibility for making detailed rules to the U.K.'s regulators, significantly increasing their powers. To ensure proper oversight of the use of those powers in practice, the FSM Act provides for an enhanced regulatory accountability framework, subjecting the regulators to additional oversight by Parliament and HM Treasury. Among other things, the FCA and Prudential Regulation Authority must keep their rules under review and publish a statement of policy on how they conduct such reviews.
The FCA is proposing a draft Rule Review Framework based on the use of data to assess the effects of a rule change. The draft Framework sets out three types of review that the FCA could conduct, describing their purpose. The three types of review are an evidence assessment, a post-implementation review and an ex post impact evaluation. The FCA's draft Framework also describes the steps it could take if the data shows that a rule is not working as had been intended. Comments on the FCA's draft Rule Review Framework may be submitted until September 15, 2023.
The PRA is also consulting on its proposed approach to reviewing its rules, including a proposed statement of policy. Responses to the PRA's consultation may be submitted until September 29, 2023.ATTORNEYS: Barnabas W.B. Reynolds, Sandy Collins
TOPICS : Brexit for Financial Services, Financial Services -
UK Government Consults on Revised UK Short Selling Regime
08/02/2023
HM Treasury has published its response to the Short Selling Regulation Review, which sought views on the proposed U.K. short selling regime. Once the new U.K. regime for short selling is finalized, the retained EU Short Selling Regulation will be revoked under the revocation framework established by the U.K. Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023"). A draft statutory instrument for the new U.K. regime is expected to be published before the end of 2023, with the final S.I. being delivered during the course of 2024. The U.K. Financial Conduct Authority will also consult on proposed rules for the new framework in 2024.
The proposed regime is intended to represent a "lighter-touch" approach that will facilitate short selling and its benefits while managing the associated risks. The changes will: (i) increase the net short position disclosure threshold from 0.1% to 0.2%; (ii) replace the current requirement to disclose all short positions over 0.5% with a new disclosures model, whereby the FCA will publish aggregated short positions in each company's shares (removing the need to reveal the identity of individual sellers); and (iii) empower the FCA to make rules on areas such as exempt share arrangements, the market maker exemption requirements and prohibitions on uncovered short selling.
Read more.ATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Brexit for Financial Services, Financial Services -
UK Financial Services and Markets Act 2023
08/02/2023
Following rigorous debate in Parliament, the U.K.'s latest Financial Services and Markets Act (FSM Act) received royal assent on June 29, 2023. The FSM Act significantly changes the U.K.'s regulatory framework for financial services, implementing the government's post-Brexit Future Regulatory Framework Review and the Edinburgh Reforms. The existing regulatory model under the Financial Services and Markets Act 2000 has been enhanced with the introduction of a new "Designated Activities Regime" for the regulation of activities related to the financial markets, transfer to the U.K. regulators of responsibility for making and reviewing detailed firm rules, subject to enhanced oversight by Parliament and HM Treasury, and the establishment of a regulatory framework for oversight of third parties that provide critical services to financial institutions.
Read more.ATTORNEYS: Barnabas W.B. Reynolds, Thomas Donegan, Sandy Collins, Chloe Barrowman
TOPICS : Brexit for Financial Services, Financial Services -
UK Government and Regulators Consult on Revised UK Prospectus Regime
08/02/2023
HM Treasury has published a near-final draft statutory instrument and related Policy Note setting out its proposed reforms to the U.K. prospectus regime. The U.K. Financial Conduct Authority has also published a series of six Engagement Papers seeking views on its proposed rules under the new regime.
Once the new U.K. regime is finalized, the retained EU Prospectus Regulation will be repealed under the revocation framework established by the U.K. Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023").
Read moreATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Brexit for Financial Services, Financial Services, Securities -
EU and UK Sign Memorandum of Understanding on Financial Services Cooperation
07/11/2023
On June 27, 2023, the EU and U.K. signed a Memorandum of Understanding on Financial Services Cooperation, a high-level agreement on future cooperation in the regulation of financial services. The MoU provides for:- exchange of views between the EU and U.K. on regulatory developments and other issues of common interest;
- transparency and communication in adopting, suspending and withdrawing equivalence decisions;
- exchange of views between the EU and U.K. on market developments and financial stability; and
- enhanced cooperation and coordination, including in international bodies.
Read more.ATTORNEYS: Barnabas W.B. Reynolds, Thomas Donegan, Chloe Barrowman
TOPIC : Brexit for Financial Services -
EU EMIR 3 Proposals Published
01/19/2023
The European Commission published proposals to amend the EU's European Market Infrastructure Regulation (EMIR) in December 2022 (EMIR 3). According to the Commission, some of these measures are aimed at improving the competitiveness of EU CCPs and of EU clearing activities, and to reduce existing reliance by EU counterparties on U.K. CCPs. Since the Brexit referendum, the EU has been grappling with the bloc's continued reliance on U.K. CCPs. The most controversial aspect is a new mandate for EU counterparties to hold "active accounts" at EU CCPs for all products, and to use such accounts for some products.
EMIR 3 would also bring in several technical changes relating to the clearing thresholds and how these operate for non-EU exchange trade derivatives (ETDs) and the exemption for certain intragroup transactions. Other proposals seek to mitigate some of the issues arising from the strain on the energy market, in particular the difficulties in fulfilling margin obligations.
Our client note, "Clearing in the EU After EU EMIR 3" describes the EMIR 3 proposals in more detail. -
Edinburgh Reforms: Changes to the Laws of the UK Financial Services Sector
12/09/2022
The U.K. Government has announced on a series of initiatives, billed as the Edinburgh Reforms, to reform the laws for the U.K. financial services sector. The proposals cover:- Reforms to Ring-Fencing Regime;
- Implementation of Post-Brexit Financial Regulatory Framework;
- Growth and Competitiveness Remit for U.K. Regulators;
- Reforms to Wholesale Markets;
- Faster Settlement;
- Senior Manager's and Certification Regime;
- Changes to Promote Investment and Growth in Financial Services;
- Sustainable Finance;
- FinTech and Digital Assets; and
- Consumer Credit.
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UK Government Publishes Financial Services and Markets Bill
07/20/2022
The U.K. government has published the much anticipated Financial Services and Markets Bill. Following its exit from the EU, the U.K. has undertaken a fundamental review of how financial regulation policy and rules should be made, reviewed and established in law, particularly in light of the return of the U.K.'s sovereignty. Furthermore, there has been a substantial assessment of the U.K.'s financial services rules and regulations, with some areas warranting further consideration. The Bill implements the outcomes of the Future Regulatory Framework Review, which assessed whether the U.K. financial services regulatory framework is fit for purpose and able to support future growth, particularly in light of challenges such as Brexit and climate change. On the same day, HM Treasury published its response to the final consultation in the FRF Review. The FSM Bill establishes a revised blueprint for financial services regulation by revamping the existing model under the Financial Services and Markets Act 2000 and revoking retained EU law in financial services. The regulators will be delegated powers for detailed rulemaking, and as a result, become subject to enhanced Parliamentary oversight.
Read more.ATTORNEYS: Sandy Collins, Barnabas W.B. Reynolds
TOPICS : Brexit for Financial Services, FinTech, MiFID II, Payment Services, Securities -
HM Treasury Publishes Final Policy Following Financial Services Future Regulatory Framework Review
07/20/2022
HM Treasury has published its final response to the Financial Services Future Regulatory Framework Review in which it sets out the government's policy approach to reforming the U.K.’s regulatory architecture post-Brexit. The response is published on the same day as the Financial Services and Markets Bill is introduced to Parliament, which will implement in legislation these significant reforms.
Read more.ATTORNEYS: Sandy Collins, Thomas Donegan, Wilf Odgers
TOPICS : Brexit for Financial Services, Financial Services -
Final UK Policy on Regulation of Central Counterparties and Central Securities Depositories Post-Brexit
07/20/2022
HM Treasury has published its final policy approach to the regulation of central counterparties and central securities depositories under the Financial Services Future Regulatory Framework Review. The response is published on the same day as the Financial Services and Markets Bill is introduced to Parliament, which will implement these changes as well as the reforms to the U.K.’s regulatory architecture post-Brexit. HM Treasury has also published its final response to the Financial Services Future Regulatory Framework Review in which it sets out the government's final policy approach to reforming the U.K.’s regulatory architecture post-Brexit.
Read more.ATTORNEYS: Sandy Collins, Thomas Donegan, Wilf Odgers
TOPICS : Brexit for Financial Services, Financial Market Infrastructure -
Government Details Proposed Financial Services and Markets Bill
05/10/2022
Following the Queen's speech yesterday, the government has published a briefing pack setting out details of the bills that it intends to introduce, including the so-called Brexit Freedoms Bill as well as key legislation relevant to financial services. The government will introduce a Financial Services and Markets Bill, which will, among other things:- Introduce new statutory objectives for the financial services regulators to support growth and international competitiveness.
- Implement the changes to the wholesale markets arising out of the Wholesale Markets Review. HM Treasury confirmed in March of this year that the changes that will be made by legislation and where powers will be delegated to the financial services regulators for rules to be made. Among the changes are the removal of the share trading obligation and the double volume cap, changes to the derivatives trading obligation, taking OTC derivatives that are economically equivalent to exchange traded commodity derivatives out of the position limits regime, and the establishment of a consolidated tape.
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Queen’s Speech Confirms Government Will Proceed with Brexit Freedoms Bill
05/10/2022
Prince Charles, Prince of Wales, delivered the Queen’s speech in which he announced that the government will be introducing the so-called Brexit Freedoms Bill, which was first announced by Prime Minister Boris Johnson on January 31, 2022, and is intended to make it easier to amend or remove retained EU laws to better suit the U.K.’s circumstances and policies. The Brexit Freedoms Bill will work in tandem with a government drive to reform, repeal and replace EU laws that are seen as outdated, cumbersome or otherwise not in the U.K.’s national interest.
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HM Treasury Publishes Responses to Review of UK Funds Regime
02/10/2022
HM Treasury has published a summary of responses to its consultation on the U.K. funds regime. The consultation forms part of the U.K. Government's plans to make the U.K. a more attractive location for asset management.
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EU Grants Further Time-Limited Equivalence for UK CCPs
02/09/2022
An EU Commission Implementing Decision extending the equivalence of U.K. CCPs to June 2025 has been published in the Official Journal of the European Union. The equivalence decision applies to U.K. CCPs already established and authorized in the U.K. on December 31, 2020 and will apply from July 1, 2022, which is when the existing equivalence decision expires. Andrew Bailey, in his speech at TheCityUK Annual Dinner in February 2022, questioned why the equivalence decisions are time-limited. Most equivalence decisions for CCPs in other jurisdictions are not time-limited, although the EU is able to revoke a decision if a jurisdiction is deemed not to maintain equivalence with the EU regime.
The Decision follows the announcement yesterday by the Commission on the extension and the launch of a targeted consultation on the review of the central clearing framework in the EU. The consultation is seeking views on ways to improve the competitiveness of EU CCPs and clearing activities while also ensuring the appropriate supervision of their risks. The consultation closes on March 8, 2022.ATTORNEYS: Thomas Donegan, Sandy Collins
TOPICS : Brexit for Financial Services, Derivatives, Financial Market Infrastructure -
UK Government Announces "Brexit Freedoms Bill"
01/31/2022
U.K. Prime Minister Boris Johnson has announced that a "Brexit Freedoms Bill" will be put before Parliament. Upon Brexit taking effect, all then in force EU Regulations were "on-shored" automatically into U.K. laws, pursuant to the European Union (Withdrawal) Act 2018, and then subject to (mostly only technical) amendments. The new bill is intended to make it easier to amend or remove retained EU laws, to better suit the U.K.'s circumstances and policies. The EUWA also replicated the then-status quo, that EU laws prevailed over conflicting national laws. The government is now also seeking to remove the supremacy of EU laws. At the same time, the government published a policy paper on the benefits of Brexit.
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UK Government Consultation on Regulation of Central Counterparties and Central Securities Depositories
01/17/2022
HM Treasury has released a further consultation under the Future Regulatory Framework Review concerning the regulation of central counterparties and central securities depositories. The Future Regulatory Framework Review is designed to assess whether the U.K. financial services regulatory framework is fit for purpose, considering the U.K.'s exit from the EU, climate change and other global and technological challenges. HM Treasury has published a series of consultations on different aspects of the future framework, including the Phase II consultation in October 2020 and the Proposals for Reform paper published in November 2021. Responses to HM Treasury's latest consultation on CCPs and CSDs may be submitted until February 28, 2022.
Read more.ATTORNEYS: Thomas Donegan, Chloe Barrowman
TOPICS : Brexit for Financial Services, Financial Market Infrastructure -
HM Treasury Publishes Amendments to UK Capital Requirements Regulation
09/23/2021
HM Treasury has made certain amendments under the U.K. Capital Requirements Regulation (Amendment) Regulations 2021 to the U.K. Capital Requirements Regulation. The UK CRR is the U.K. version of the corresponding EU regulation, as applicable after Brexit. The new regulations introduce some new provisions and revoke certain others. The related explanatory memorandum describes the changes in further detail. The changes will come into force on January 1, 2022.
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UK Financial Services Act 2021 Published
04/29/2021
The U.K. Financial Services Bill has received Royal Assent from Her Majesty the Queen and has become an Act of Parliament, the Financial Services Act 2021. Some provisions of the Act came into force on the date of Royal Assent, with a limited number following on June 29, 2021. The majority of the Act will come into force on a date specified in regulations yet to be made by HM Treasury.
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HM Treasury Published Response to Phase I of UK's Financial Services Future Regulation Framework Review
03/11/2021
HM Treasury has published its response to the call for evidence on Phase I of the U.K. Financial Services Future Regulatory Framework Review. The FRF Review was announced in March 2019 and will assess whether the U.K. financial services regulatory framework is fit for purpose, taking into account the U.K.'s exit from the EU, climate change and other global and technological challenges. The call for evidence on Phase I of the Review focussed on how the Government and regulators work together to ensure the best outcome for the financial services sector.
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UK Listings Review Recommends Major Overhaul of the UK’s Listing and Capital Markets Rules
03/03/2021
The U.K. Government has published the report by Lord Hill on the U.K. Listings Review. The report assesses how, following Brexit, the existing U.K. listing regime could be reformed to attract more companies, particularly innovative technology and life sciences companies, to raise capital in London. In the context of Brexit, the U.K. is considering the challenges to London's position as a global capital markets hub. The Review makes 14 specific recommendations to address these challenges, including changes to the Financial Conduct Authority's premium and standard segment listing rules on which the FCA will be asked to consult and more general changes in relation to prospectuses on which HM Treasury will need to consult. In addition, the Review identifies longer- term areas for reform, such as secondary capital raises and the greater empowerment of retail investors.
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European Securities and Markets Authority Consults on 2021 Supervisory Fees for EU Trade Repositories
02/22/2021
The European Securities and Markets Authority has published a consultation on its proposals for recalibrating the 2021 annual supervisory fees to be charged by ESMA to EU trade repositories. ESMA's annual fees are intended to cover its costs for supervising EU trade repositories, and to be proportionate to the turnover of the trade repository concerned.
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EU Delays Derivatives Margin for Brexit Novations
02/17/2021
An EU Commission Delegated Regulation amending Regulatory Technical Standards on the application of EU bilateral margining requirements under the European Market Infrastructure Regulation has been published in the Official Journal of the European Union. The amendments to the RTS further extend the temporary exemptions from bilateral margining requirements for the following products and transactions.
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EU Delays Clearing Obligation for Third-Country Intragroup Derivatives and Brexit Novations
02/17/2021
An EU Commission Delegated Regulation delaying the clearing obligation under the European Market Infrastructure Regulation has been published in the Official Journal of the European Union. The Delegated Regulation amends the three Regulatory Technical Standards on the clearing obligation, which provide for the application of the clearing obligation to interest rate swaps and credit default swaps. In particular, for intra-group derivatives transactions conducted with a third-country entity, the exemption from the clearing obligation will be extended until June 30, 2022. The EU has failed to determine whether many third countries are "equivalent" for these purposes, meaning that another delay is necessary to avoid penal charges on intra-group exposures of EU financial groups.
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UK Conduct Regulator Publishes Approach to International Firms
02/03/2021
The U.K. Financial Conduct Authority has published its final Approach to international firms, setting out its approach to authorization and supervision of international firms providing or seeking to provide financial services that require authorization in the U.K. The FCA has also published a feedback statement summarizing its response to the submissions received in response to its consultation last year. The Approach Document sets out the conditions against which a firm will be assessed and discusses the circumstances in which firms may present higher risks and how the risks could be mitigated. It generally proposes that U.K.-authorized firms should have a U.K. place of business, so would not result in any new regime for EU firms which are currently using the "temporary permissions regime".
The FCA's Approach Document is not relevant to firms that are operating in the U.K., but do not need authorization to do so, for example, those firms using the Overseas Persons Exclusion. It is not also not relevant for payment services firms, e-money institutions, depositaries, trustees and managers of U.K. authorized funds, international alternative investment fund managers and international benchmark administrators.
Firms that are or would be subject to dual regulation, should also consider the approach of the Prudential Regulation Authority to the supervision and authorization of firms.
View the FCA's Approach to International Firms.
View the FCA's feedback statement.
View details of the PRA's consultation on its approach to supervising international banks. -
UK Equivalence Decision for Swiss Exchanges Enters into Force
02/03/2021
The U.K.'s Swiss share trading obligation equivalence decision has entered into force. The equivalence decision has been made under the U.K.'s Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021, which came into force on February 3, 2021, and means that U.K. investment firms will be able to comply with the share trading obligation under the U.K. Markets in Financial Instruments Regulation by trading shares on BX Swiss AG and SIX Swiss Exchange AG.
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EU Authority Issues Statement on Reverse Solicitation under MiFID II
01/13/2021
The European Securities and Markets Authority has issued a statement reminding firms of the rules on reverse solicitation under the Markets in Financial Instruments Directive and Regulation. MiFID II provides that EU retail or professional clients may reach outside the EU and acquire services and products from non-EU investment banks (known as "reverse solicitation") and that in these circumstances the third-country firm is exempt from the requirement to establish an EU branch. ESMA has issued the statement following what it describes as "questionable practices" materializing following the end of the Brexit transition period, where firms have purported to opt clients into "reverse solicitation" through either generic terms and conditions amendments or click-through "I agree" boxes online. It is clear from this guidance that ESMA's view is that more is needed than this to invoke the reverse solicitation regime. Notably, the ESMA report does not criticise more robust reverse solicitation protocols that are currently being seen in the market, such as a termination notice by the U.K. service provider of the existing agreement, sometimes with a covering note that the client could at its initiative reach out afresh to request entry into of a new agreement should it so desire.
View ESMA's statement on reverse solicitation.
You may like to view our client note, "On the Existence of a Pan-European Reverse Solicitation Regime Under MiFID II, and its Importance on a 'Hard' Brexit". -
UK Grants Equivalence to Swiss Exchanges for Purpose of UK Share Trading Obligation
01/13/2021
U.K. legislation has been made granting equivalence to Swiss exchanges under the U.K.'s Markets in Financial Instruments Regulation. The Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021, which enter into force on February 3, 2021, grant equivalence to two Swiss exchanges - BX Swiss AG and SIX Swiss Exchange AG. U.K. MiFIR requires U.K. investment firms to ensure that the trades they undertake in shares admitted to trading on a regulated market or traded on a trading venue take place on a regulated market, multilateral trading facility, systematic internaliser or equivalent third-country trading venue. U.K. investment firms will be able to comply with the U.K. MiFIR share trading obligation by trading shares on these Swiss exchanges.
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UK Government Proposes Extending Regulatory Perimeter to Capture Stablecoins
01/07/2021
HM Treasury has opened a consultation on the proposed U.K. approach to crypto-assets and stablecoins, in particular a proposal to bring stablecoins into the U.K. regulatory perimeter. Responses to the consultation may be submitted until March 21, 2021. The government will consider the responses to the consultation and publish a response with further details on how the approach would be implemented in law. If the policy approach is followed, the regulators would consult further on rules for firms.
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UK Prudential Regulator Publishes Final Rules on Implementation of CRD V
12/28/2020
The U.K. Prudential Regulation Authority has published its final Policy Statement setting out the final rules for implementing CRD V in the U.K. The Policy Statement confirms the final rules set out in the PRA's near-final Policy Statement, published on December 9, 2020. The Policy Statement also confirms the PRA's proposed approach to enforcing compliance with consolidated prudential requirements for U.K. banking consolidation groups, as proposed in the PRA's consultation paper published on December 9, 2020. The Supervisory Statements and Statements of Policy attached to the Policy Statement should be read together with the PRA's Supervisory Statement, "Non-binding PRA materials: The PRA's approach after the UK's withdrawal from the EU", for guidance on how to interpret the materials after the end of the transition period.
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UK Government Seeks Input on UK Framework for Cross-Border Financial Services
12/15/2020
HM Treasury has launched a call for evidence on the U.K.'s framework for cross-border financial services. HM Treasury is considering policy approaches for ensuring the U.K. framework is fit for the future given the U.K.'s exit from the EU, including consideration of how effective and proportionate regulation can support attracting investment and liquidity to the U.K. Responses to the consultation may be submitted until March 11, 2021.
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UK Central Securities Depository Granted Temporary Recognition by the European Securities and Markets Authority
12/11/2020
The European Securities and Markets Authority has announced that Euroclear UK & Ireland Limited, a central securities depository established in the U.K., will be granted recognition under the EU CSD Regulation. The recognition will allow Euroclear UK & Ireland Limited to continue to provide certain services to EU customers after the end of the Brexit transitional period until at least June 30, 2021. ESMA's recognition decision follows the November 2020 temporary equivalence decision granted to U.K. CSDs.
View ESMA's announcement.
View details of the EU's equivalence decision for U.K. CSDs. -
UK Prudential Regulator Publishes Policy Statement and Near-Final Rules on Implementation of CRD V
12/09/2020
The U.K. Prudential Regulation Authority has published a policy statement setting out responses to its consultations on the U.K. implementation of CRD V, as well as its near-final policy material. The final rule instruments will be published in time for the December 28, 2020 deadline for implementation of CRD V. The policy statement is relevant to U.K. banks, building societies, PRA-designated investment firms and U.K. financial holding companies and mixed financial holding companies.
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UK Prudential Regulator Consults on Banking Consolidation Group Prudential Compliance During Brexit Transition Period
12/09/2020
The U.K. Prudential Regulation Authority has launched a consultation on which bank entities should be responsible for ensuring compliance with consolidated prudential requirements for U.K. banking consolidation groups for a transitional period between December 28, 2020 and the date on which the relevant group's parent holding company is approved or declared exempt from the requirements under the PRA's approval regime.
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EU Authorities Warn of Potential Loss of Preferential Capital Treatment for STS Securitizations
12/07/2020
The European Supervisory Authorities have issued a press release warning of the change in the status of "simple, transparent and standardized" securitization transactions at the end of the Brexit transition period on December 31, 2020. The Securitization Regulation provides the criteria for identifying which securitizations will be designated as STS securitizations, a system to monitor the application of those criteria as well as common requirements on risk retention, due diligence and disclosure. Related amendments to the EU Capital Requirements Regulation set out the regulatory treatment of exposures to securitizations that are deemed to be STS securitizations. For a securitization to qualify as an STS securitization, the EU Securitization Regulation requires the originator, sponsor and securitization special purpose entity to be established in the EU. The ESA's announcement highlights that securitizations that currently meet the STS criteria may not do so from January 1, 2021, if one or more of the originator, sponsor or SSPE are established in the U.K. The loss of STS status will mean that the EU CRR preferential capital treatment is no longer available.
The European Securities and Markets Authority will be working with EU national regulators to ensure that its database of STS securitizations is up to date as at January 1, 2021.
View the ESA's press release. -
EU Grants Temporary Equivalence for UK Central Securities Depositories
11/26/2020
An EU equivalence decision has been published in the Official Journal of the European Union granting temporary equivalence for U.K. central securities depositories from the end of the Brexit transitional period (on December 31, 2020). The equivalence decision applies to CSDs already established in the U.K. and will apply from January 1, 2021 until June 30, 2021.
View the EU equivalence decision for U.K. CSDs. -
EU Markets Authority Confirms Position on Derivatives Trading Obligation Post-Brexit
11/25/2020
The European Securities and Markets Authority has confirmed its position, originally proposed in March 2019, that the derivatives trading obligation under the EU Markets in Financial Instruments Regulation will continue to apply without changes, and as things stand without any U.K. equivalency, after the end of the Brexit transition period on December 31, 2020.
The derivatives trading obligation requires EU investment firms to conclude transactions in certain derivatives on EU regulated markets, multilateral trading facilities, organized trading facilities or third-country venues in jurisdictions benefiting from an EU equivalence decision. The trading obligation applies to certain fixed-to-float interest rate swaps denominated in EUR, USD and GBP and to certain index credit default swaps (iTraxx Europe Main and iTraxx Europe Crossover).
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Revised Final Draft EU Technical Standards Published for Derivatives Margin and Clearing Obligations
11/23/2020
The European Supervisory Authorities have published final draft amending Regulatory Technical Standards on the application of EU bilateral margining requirements and the clearing obligation under the European Market Infrastructure Regulation in light of Brexit. The draft RTS are set out in two separate reports – one published jointly by the ESAs (covering the bilateral margining requirements for uncleared derivatives), the other published by the European Securities and Markets Authority (covering the clearing obligation for certain derivatives).
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HM Treasury and U.K. Regulators Publish Statement on Implementation Date for Prudential Reforms for UK Investment Firms
11/16/2020
HM Treasury has issued a joint statement with the U.K. Financial Conduct Authority and the Prudential Regulation Authority confirming a targeted implementation date of January 1, 2022 for the reforms to the prudential regulation of U.K. investment firms set out in the U.K. Financial Services Bill.
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EU Authority Updates Statements on Reporting Obligations Post-Brexit Transitional Period
11/10/2020
The European Securities and Markets Authority has published updated statements regarding the end of the Brexit transition period on December 31, 2020.
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UK Grants Equivalence to EEA CCPs
11/10/2020
The U.K. Central Counterparties (Equivalence) Regulations 2020 (SI No. 2020/1244) have been made, granting equivalence for EEA CCPs from 10:59 pm on December 31, 2020. The decision will enable U.K. businesses and trading venues to continue using the clearing services of EEA CCPs under the U.K. European Market Infrastructure Regulation after the end of the Temporary Recognition Regime, provided that the Bank of England grants the individual CCP concerned recognition status.
The EU has granted temporary equivalence for U.K. CCPs, which is set to expire in June 2022.
View the Central Counterparties (Equivalence) Regulations 2020, SI No. 2020/1244.
View details of the temporary equivalence decision for U.K. CCPs. -
EU Moves to Ease Brexit Implications for Post-Trade Transparency and Position Limits Regime
10/27/2020
Following its statement at the start of October 2020, the European Securities and Markets Authority has announced that U.K. trading venues have been positively assessed for the purposes of the post-trade transparency obligations and position limits regime under the Markets in Financial Instruments package. From January 1, 2021, EU investment firms will not be required to make transactions public in the EU via an EU Approved Publication Arrangement if they are executed on a U.K. trading venue that appears on ESMA's transparency list. In addition, commodity derivative contracts traded on U.K. trading venues that are on ESMA's position limits list will not be considered as economically equivalent OTC contracts and will thus not be subject to the EU position limit regime.
View ESMA's announcements and lists.
View details of ESMA's earlier statement in October.
View details of the FCA's statement on the U.K.'s position. -
EU Publishes Further Statement on Endorsement by EU Credit Rating Agencies of UK Ratings After the Brexit Transition Period
10/27/2020
The European Securities and Markets Authority has published a further statement confirming that U.K. credit ratings can be endorsed by EU credit rating agencies from January 1, 2021, when the Brexit transition period ends. The EU CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may use credit ratings only for certain regulatory purposes if a rating is issued by: (i) an EU CRA registered with ESMA; or (ii) a third-country CRA under the endorsement regime or the equivalence/certification regime. There is currently no equivalence decision for the U.K. CRA regime. Therefore, EU entities may use U.K. credit ratings only for regulatory purposes if the rating has been endorsed by an EU CRA. ESMA confirmed in March 2019 a positive assessment of the U.K.'s CRA regime for the purposes of endorsement. However, the final decision to endorse is for an EU CRA.
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EU Markets Authority Updates Post-Brexit Position on EU Share Trading Obligation
10/26/2020
The European Securities and Markets Authority has published an updated statement on the impact of Brexit on the trading obligation for shares where no decision on the U.K.'s equivalence as a third country market has been made. The EU Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e., namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The U.K. has adopted this requirement in its onshored MiFID II legislation. Similarly, following its exit from the EU, the new U.K. onshored share trading obligation would restrict the trading of shares in the U.K. to trades on U.K. trading venues unless a third-country equivalence decision was made.
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UK Parliament Publishes Financial Services Bill for Post-Brexit Regulatory Framework
10/21/2020
The U.K. Government has published a Financial Services Bill setting out a proposed regulatory framework for the financial services industry following the U.K.'s exit from the EU. The Bill is part of the U.K.'s wider initiative under the Future Regulatory Framework Review to re-frame its regulatory framework. Although Brexit has brought challenges to the financial sector, there may also be post-Brexit opportunities for the U.K. to seize. The aim of these reforms is to cement the U.K.'s position as a global financial centre of excellence. A core piece of that will be to set conditions that continue attracting business to the U.K. and to look for opportunities to cut "red tape" whilst at the same time maintaining the U.K.'s globally recognized high regulatory standards.
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UK Prudential Regulator Issues Further Consultation on Implementation of CRD V and CRR II
10/20/2020
The U.K. Prudential Regulation Authority has published a further consultation on its proposed implementation of the fifth Capital Requirements Directive. CRD V came into force in July 2019. EU Member States are required to implement the majority of CRD V provisions by December 28, 2020. As this is prior to the end of the U.K.'s Brexit transition period, the U.K. is obliged to transpose those provisions of CRD V that are applicable befor the end of the transition period into U.K. law under the terms of the EU-U.K. Withdrawal Agreement.
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HM Treasury Consults on Phase II of UK's Financial Services Future Regulation Framework Review
10/19/2020
HM Treasury has launched a consultation on Phase II of the U.K.'s Financial Services Future Regulatory Framework Review. Phase II focuses on how the U.K.'s financial services regulatory framework must be adapted to be fit for the future given the U.K.'s exit from the EU. The first part of Phase II, to which this consultation relates, seeks to establish a blueprint for financial services regulation. Responses to the consultation should be submitted by February 19, 2021. The second part of Phase II will constitute a final package of proposals and will be consulted on later in 2021.
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HM Treasury Publishes Results of Consultation on CRD V Implementation
10/15/2020
HM Treasury has published a summary of the responses to its consultation on the U.K.'s implementation of the fifth Capital Requirements Directive, together with HM Treasury's proposed next steps. CRD V came into force in July 2019 and EU Member States are required to implement the majority of its provisions by December 28, 2020. As this is prior to the end of the U.K.'s Brexit transition period, the U.K. is obliged to transpose these provisions of CRD V that are applicable before the end of the transition period into U.K. law under the terms of the EU-U.K. Withdrawal Agreement.
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UK Conduct Regulator Bans Sale to Retail Clients of Derivatives Referencing Crypto-Assets from January 2021
10/06/2020
The U.K. Financial Conduct Authority has published a Policy Statement and final rules prohibiting the sale, marketing and distribution to retail clients of derivatives and exchange traded notes referencing certain types of unregulated, transferable crypto-assets by firms acting in, or from, the U.K. The ban will apply from January 6, 2021.
The prohibition will apply to the marketing, distributing or selling of crypto derivatives in, or from, the U.K. to retail clients by MiFID investment firms, MiFID optional exemption firms, U.K. branches of third-country investment firms and to EEA MiFID investment firms that currently passport into the U.K. and which will continue operating after the Brexit transitional period ends on January 1, 2021.
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UK Conduct Regulator Confirms Post-Brexit Position on Post-Trade Transparency and Position Limits
10/02/2020
The U.K. Financial Conduct Authority has issued a statement confirming the U.K. position from January 1, 2021, for post-trade transparency reporting obligations and position limit regime under the U.K. Markets in Financial Instruments package. The FCA confirms that:- U.K. firms trading on non-U.K. trading venues will not be required to publish details of those transactions through a U.K. Approved Publication Arrangement; and
- Commodity derivative contracts traded on trading venues are not considered by the FCA to be economically equivalent OTC contracts and will not be subject to the U.K. commodity derivatives position limits regime.
The FCA's statement follows the statement made the previous day by the European Securities and Markets Authority that it intended to assess U.K. trading venues for the purpose of the EU post-trade transparency obligations and position limits regime. If ESMA assesses a U.K. trading venue positively, then trades on the venue will not need to be reported by EU investment firms through an EU APA, and they will not be subject to the position limits regime.
View the FCA's statement.
View details of ESMA's statement. -
EU to Assess UK Trading Venues to Clarify Post-Brexit Position for Post-Trade Transparency and Position Limits Regime
10/01/2020
The European Securities and Markets Authority has published updated statements on the impact of Brexit on the application of the Markets in Financial Instruments package and the EU Benchmark Regulation. ESMA issued statements in 2019 to clarify the position in a no-deal scenario. These latest statements provide updates to take into account the Withdrawal Agreement and the end of the Brexit transition period on December 31, 2020.
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Final Technical Standards on Third-Country Investment Firm Registration and Reporting Requirements
09/28/2020
The European Securities and Markets Authority has published final draft Technical Standards on the provision of investment services and activities in the EU by third-country firms under the Markets in Financial Instruments package. Amendments that were made to the MiFID II package under the Investment Firm Regulation and Directive require, among other things, third-country firms providing services to all types of clients to provide ESMA with further information. In addition, ESMA has increased powers over third-country firms providing services to eligible counterparties and per se professional clients, such as the ability to conduct on-site inspections and impose product restrictions or prohibitions. The revisions will apply from June 26, 2021.
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EU Grants Temporary Recognition to UK CCPs For End of Brexit Transition Period
09/28/2020
The European Securities and Markets Authority has announced that it has granted temporary third-country recognition to three U.K. CCPs from January 1, 2021 under the European Market Infrastructure Regulation. ESMA's announcement follows the time-limited equivalence decision for the U.K.'s legal and regulatory supervision regime of U.K. CCPs, which was published on September 21, 2020. The third-country recognition for ICE Clear Europe Limited, LCH Limited and LME Clear Limited means that EU clearing members of these three CCPs will be able to continue to access the services and that the CCPs will be able to continue to provide their services in the EU at the end of the transition period on December 31, 2020, following the U.K.'s withdrawal from the EU.
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UK Conduct Regulator Consults on Post-Brexit Approach to Authorization for Non-UK Firms
09/23/2020
The U.K. Financial Conduct Authority has launched a consultation on its intended approach to international firms seeking to provide regulated financial services in the U.K. after the Brexit transition period ends on December 31, 2020 and the U.K.'s temporary permissions regime comes to an end three years later. The FCA intends to use the consultation responses to inform the publication of a document that would explain the FCA's general approach to regulating international firms. The consultation does not propose any changes to the FCA's existing rules or to the FCA Handbook. Responses should be submitted by November 27, 2020.
Read more.TOPIC : Brexit for Financial Services -
Bank of England Consults on Changes to Brexit Onshoring Legislation
09/22/2020
The Bank of England has launched a consultation on proposed changes to the BoE and Prudential Regulation Authority's Brexit onshoring legislation. The U.K. left the EU on January 31, 2020. Under the terms of the EU Withdrawal Agreement, the U.K. agreed that EU legislation continues to apply in the U.K. until the end of the transition or implementation period on December 31, 2020 (known as "IP completion day"). The existing Brexit onshoring legislation ensures that, after EU law ceases to apply in the UK at the end of the transition or implementation period, U.K. legislation remains functional. Further updates to the onshoring legislation and regulatory rules are needed, however, to take account of the transition or implementation period (which delayed the entry into force of the onshoring legislation) and of additional EU legislation that will apply in the U.K. prior to the end of that period.
Read more.TOPIC : Brexit for Financial Services -
European Commission Decision Temporarily Establishes UK CCP Equivalence
09/21/2020
The European Commission has published a Decision temporarily determining that U.K. central counterparties will be deemed equivalent to EU standards under the European Market Infrastructure Regulation. The Decision will apply from January 1, 2021 until June 30, 2022. The U.K.'s Brexit transition period ends on December 31, 2020, after which it will cease to form part of the EU's arrangement for financial services. The Decision grants equivalence for a limited 18-month duration.
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UK Government Consults on International Regulatory Cooperation Strategy
09/02/2020
The U.K. Government has launched a consultation on its future international regulatory cooperation strategy. The consultation has been prompted by a report published by the Organization for Economic Cooperation and Development. In its report, the OECD set out 25 recommendations for how the U.K. can improve its policies and practices in shaping and complying with international agreements and collaborating with international counterparts when designing and enforcing regulations. The report is intended to cover regulatory practices in general, meaning banking regulation falls within the scope of the recommendations. With the U.K. having left the EU on January 31, 2020, and the end of the U.K.'s transitional period due to end on December 31, 2020, the U.K. Government believes there is an opportunity to build new regulatory practices that support the future prosperity of the U.K.
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UK Prudential Regulator Reminds Firms of Need to Satisfy Temporary Permissions Regime Requirements
09/01/2020
The U.K. Prudential Regulation Authority has published a Dear CEO letter addressed to all PRA-regulated firms on operational readiness for the Temporary Permissions Regime. The U.K. left the EU on January 31, 2020 and the related transitional period, during which EU firms maintain their U.K. passporting rights, will expire at 11 pm on December 31, 2020. The TPR will take effect from after that time. The Dear CEO letter reminds firms of their obligations under the TPR and urges them to consider their firm's operational preparedness for entering the TPR, including satisfying their regulatory requirements.
View the Dear CEO letter.TOPIC : Brexit for Financial Services -
UK Prudential Regulator Consults on UK Implementation of CRD V
07/31/2020
The U.K. Prudential Regulation Authority has published a consultation on proposed changes to the PRA rules to implement the fifth Capital Requirements Directive. CRD V came into force in July 2019 and EU Member States are required to implement the majority of its provisions by December 28, 2020. As this is prior to the end of the U.K.'s Brexit transition period, the U.K. must transpose those provisions of CRD V that are applicable before the end of the transition period into U.K. law under the terms of the EU-U.K. Withdrawal Agreement. Certain of those provisions (including those relating to capital buffers and holding company approval and supervision) must be implemented in the U.K. by HM Treasury. Those provisions are the subject of a separate consultation by HM Treasury consultation (published on July 16, 2020). HM Treasury has delegated responsibility for implementation of the remaining provisions to the PRA.
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UK Government Launches Payments Landscape Review
07/28/2020
HM Treasury has launched a call for evidence on the U.K.'s payments landscape, which is the first stage of the Payments Landscape Review announced in June 2019. The government is seeking input on the opportunities, gaps and risks that need to be addressed to support the U.K.'s position as being at the forefront of payments technology. Responses may be submitted until October 20, 2020. The government will publish a summary of the responses it receives and set out next steps for the review.
In the call for evidence, the government sets out the steps taken to achieve the aims that were published in 2012 to support the high-level strategy of ensuring that end user consumers and businesses benefit from the U.K. payment networks. Feedback is sought on the extent to which those aims have been achieved.
HM Treasury also discusses the main incentives for new payment systems and services, covering the New Payments Architecture, Faster Payments, the impact of Open Banking on how the systems are used, trends towards new service providers and payment chains and development in cross-border payments. The call for evidence also reflects on the wider work being undertaken on crypto-assets and stablecoins.
View the call for evidence on the U.K.'s payments landscape. -
HM Treasury Consults on UK Implementation of CRD V
07/16/2020
HM Treasury has launched a consultation on the U.K.'s implementation of the EU amendments to the Capital Requirements Directive that were published in June 2019 (known as CRD V). EU Member States are required to implement the CRD V changes into their national regimes by December 28, 2020. As this is prior to the end of the U.K.'s Brexit transition period, the U.K must transpose those provisions of CRD V that are applicable before the end of the transition period into U.K. law under the terms of the EU-U.K. Withdrawal Agreement. HM Treasury's consultation relates only to those aspects of CRD V that must be implemented via legislation. The rest of CRD V will be implemented by the U.K. Prudential Regulation Authority through updates to the PRA rules. Responses to HM Treasury's consultation should be submitted by August 19, 2020.
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European Commission Publishes Notices to Financial Services Stakeholders on UK Withdrawal from EU
07/07/2020
The European Commission has published a series of updated notices, including many addressed to firms operating in the financial services industry, on the actions that should be taken to prepare for the end of the transition period following the U.K.'s withdrawal from the EU on January 31, 2020. The transition period ends on December 31, 2020. The notices most relevant to the financial services industry relate to asset management, banking and payment services, credit ratings agencies, emissions trading systems and consumer protection and passenger rights. They update and replace the notices originally published in 2018.
Read more.TOPIC : Brexit for Financial Services -
UK Legislation Made to Onshore EMIR 2.2
06/26/2020
The U.K. has published Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020 to onshore the new EU regime for third-country CCPs introduced by amendments to the European Market Infrastructure Regulation, known as EMIR 2.2. EMIR 2.2, which has applied since January 1, 2020, is part of the EU’s push to enhance the regulation of CCPs amid concerns regarding potential CCP failures given their increasing systemic importance and is widely regarded as a direct response to Brexit, given that three of the largest European CCPs are based in the U.K.
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UK Regulator Publishes Discussion Paper on New Investment Firm Prudential Regime
06/23/2020
The U.K. Financial Conduct Authority has published a discussion paper setting out its initial views on establishing a new Investment Firm Prudential Regime. The EU introduced a new prudential regime for EU investment firms through the Investment Firm Regulation and the Investment Firm Directive, which will (mostly) apply from June 26, 2021. The U.K. encouraged the introduction of the EU IFD and IFR while it was a member of the EU. However, the U.K. will not implement the IFR and IFD into U.K. laws as they come into force after the U.K. has left the EU and after the Brexit transitional period ends.
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HM Treasury Consults on UK Transposition of Revised EU Bank Recovery & Resolution Directive
06/23/2020
HM Treasury has launched a consultation on the U.K.'s intended transposition of the revised EU Bank Recovery and Resolution Directive (known as BRRD 2). BRRD 2 came into force in June 2019 and introduced a series of amendments to BRRD. EU Member States are required to transpose BRRD 2 into their national laws and apply the provisions by no later than December 28, 2020, except for provisions relating to Minimum Requirements for Own Funds and Eligible Liabilities, which apply from January 1, 2024. Under the terms of the Brexit Withdrawal Agreement, the U.K. government has committed to implementing all EU legislation due to be transposed before the end of 2020. HM Treasury has confirmed that, as the implementation of MREL provisions is not required until 2024, the U.K. intends to exercise its discretion to transpose those requirements. The U.K. already has a MREL framework which is based on the Financial Stability Board's Total Loss Absorbing Capacity standards.
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HM Treasury Updates Policy Statement on Prudential Standards for Investment Firms in UK Financial Services Bill
06/23/2020
HM Treasury has published an updated policy statement on its proposals for the prudential standards in the U.K.'s upcoming Financial Services Bill. The Financial Services Bill will set out a proposed regulatory framework for the financial services industry following the U.K.'s exit from the EU. HM Treasury published its original policy statement on the proposed prudential regime in March 2020, setting out its plans to: (i) complete the U.K.'s implementation of the remaining Basel III standards; and (ii) establish a new prudential regime for U.K. investment firms.
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UK Publishes Post-Brexit Cyber Sanctions Regulations
06/17/2020
The U.K. Government has published the Cyber (Sanctions) (EU Exit) Regulations 2020 and an explanatory memorandum. The Regulations are made under the Sanctions and Anti-Money Laundering Act 2018, which was introduced to enable the U.K. Government to implement international sanctions following its departure from the EU. The majority of the SAMLA provisions entered into force on November 22, 2018. The purpose of the Regulations is to ensure that the U.K. has an effective cyber sanctions regime at the end of transitional period (currently scheduled for December 31, 2020) as part of the U.K.'s exit from the EU.
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EU Response to UK Letter on Negotiating Positions
05/22/2020
The EU's chief negotiator, Michel Barnier, has responded to the letter of May 19, 2020 of U.K. chief negotiator, David Frost. Mr. Frost had notified Mr. Barnier that the U.K. government had published U.K. drafts of the proposed Comprehensive Free Trade Agreement between the U.K. and EU, as well as other agreements and schedules. Mr. Frost's letter had also included comments on some of the EU positions in the negotiations. In his letter, Mr. Barnier states that he does not think that the substantive points of the negotiation should be debated through written correspondence, however, he does go on to respond to the comments. Mr. Barnier states that the EU is not bound to follow as precedent deals that the EU has concluded with other countries, and that the EU is only following the commitments made in the Political Declaration agreed between the EU and the U.K. in October 2019. Mr. Barnier also emphasises that the EU is seeking to obtain a "level playing field", which, according to the EU's chief negotiator means upholding the current common high standards applicable in the EU and in the U.K. at the end of the transition period in the areas of state aid, competition, social and employment standards, environment, climate change and relevant tax matters. It would mean that the U.K. could impose tougher regulations after the transitional period, but would be tied to the existing EU level of standards.
Read more.TOPIC : Brexit for Financial Services -
UK Draft Negotiating Documents Published
05/19/2020
The U.K. government has published a letter from U.K. chief negotiator David Frost to EU counterpart Michel Barnier and U.K. draft legal texts of the proposed U.K.-EU Comprehensive Free Trade Agreement, as well as other agreements and schedules. The documents set out the U.K. government's position on the future U.K.-EU relationship. In the letter, key points on the U.K.'s position are made. These are:
- The U.K. is seeking to conclude a suite of agreements with the EU with an FTA at the core, all of which are based on precedent agreements that the EU has with other countries. The U.K. is not seeking to remain in the Single Market or the Customs Union.
- The EU's drafts do not include the same text as that agreed with other countries. For example, the EU is not proposing to replicate the inclusion of provisions on regulatory cooperation for financial services that are agreed between the EU and Japan.
- The EU proposals are unaligned with the commitment made by both parties to maintain a level playing field. For example, the EU is proposing that the U.K. accept EU state aid rules and be subject to tariffs on trade if those rules were to be breached.
TOPIC : Brexit for Financial Services -
UK Conduct Regulator Announces Details of Post-Brexit Temporary Permissions Regime for EEA Firms and Funds
04/11/2020
The U.K. Financial Conduct Authority has published details of the temporary permissions regime that will allow FCA-regulated EEA firms to continue providing financial services in the U.K. for a limited period following the U.K.’s exit from the EU, in the event that no implementation or transitional period is agreed under the Withdrawal Agreement. Without an implementation or transitional period, EEA firms’ passporting rights to provide financial services would cease on the date that the U.K. leaves the EU.
Read more.TOPIC : Brexit for Financial Services -
UK Prudential Regulator Publishes 2020/2021 Business Plan
04/09/2020
The U.K. Prudential Regulation Authority has published its Business Plan for 2020/2021, which sets out its strategic goals for the next 12 months and its work plan to deliver them. The PRA has had to tailor its intended Business Plan to take account of the impact of the COVID-19 pandemic. In particular, it has elected to cancel its 2020 annual cyclical scenario stress tests, delay the publication of the results of the 2019 biennial exploratory scenario, postpone less critical aspects of its supervisory program for individual firms and extend consultation periods and implementation timeframes for new initiatives where possible.
Read more. -
Brexit Negotiations: European Commission Publishes Draft EU-UK Agreement
03/18/2020
The European Commission has published a draft of the proposed agreement between the U.K. and the EU to govern the future relationship between the two, including provisions on financial services. The list of in-scope services includes all services under the Markets in Financial Instruments Directive, the EU Capital Requirements legislation, the European Market Infrastructure Regulation and other legislation. Other provisions of the draft bring market developments in scope and ensure that U.K. financial institutions can provide, subject to certain conditions being met, new services and products in the EU. Notably, the Commission’s draft text provides a carve-out that allows either side to adopt prudential measures for financial stability reasons or for the protection of investors, depositors, policy-holders or persons to whom a fiduciary duty is owed by a financial service supplier. The draft text also includes a commitment by both the EU and U.K. to implement internationally-agreed standards for financial services regulation and supervision, anti-money laundering and counter terrorism and tax evasion.
View the European Commission's Draft Text of the Agreement on the New Partnership with the United Kingdom.TOPIC : Brexit for Financial Services -
HM Treasury Policy Statement on Prudential Standards for Investment Firms in UK Financial Services Bill
03/11/2020
HM Treasury has published a policy statement on its proposals for the prudential standards in the U.K.'s upcoming Financial Services Bill. The Financial Services Bill will set out a proposed regulatory framework for the financial services industry following the U.K.'s exit from the EU. The U.K. has historically wished and repeatedly sought to impose higher capital requirements on banks and investment firms than the EU has accepted, in part driven by the better capitalization of U.K. banks compared to some EU institutions. The new policy statement establishes four overarching principles which will govern HM Treasury's approach to prudential standards: (i) financial stability and high international standards; (ii) supporting growth, competition and competitiveness; (iii) giving U.K. regulators a central role in designing technical prudential requirements; and (iv) flexibility, allowing the U.K. to maintain its relationship with the EU and take account of U.K.-specific requirements.
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Brexit Negotiations: UK Government Publishes Approach to Future EU-UK Relationship
02/27/2020
The U.K. government has published a document setting out its negotiating proposals for a future relationship with the EU. The U.K. left the EU on January 31, 2020 and is no longer an EU member state. However, during an agreed transitional period (currently scheduled to end on December 31, 2020), EU laws and regulations will continue to apply in the U.K. The EU and U.K. will be negotiating during that period on their future relationship.
Read more.TOPIC : Brexit for Financial Services -
EU Council Authorizes European Commission to Negotiate Post-Brexit Trade Agreement with the UK
02/25/2020
The Council of the European Union has authorized the opening of negotiations with the U.K. for a new partnership agreement between the U.K. and the EU. The Council's Decision (dated February 13, 2020) authorizes the opening of the negotiations, appoints the Commission as negotiator and stipulates that the negotiations must be conducted in consultation with the Working Party on the United Kingdom and in accordance with the Council's directives.
The EU intends to enter into a free trade agreement with the U.K. For financial services, the Council directs that the arrangements between the EU and U.K. should be based on their respective equivalence frameworks, complemented by close and voluntary cooperation and consultation and transparency on equivalence decisions. The EU envisages that the FTA should be in line with existing EU FTAs with other countries for specific sectors, including the financial services sector.
It is expected that the first session of negotiations will take place in early March.
View the Council's decision authorising the opening of the negotiations.
View the negotiating directives.TOPIC : Brexit for Financial Services -
Draft UK Legislation to Onshore EMIR 2.2 Published for Feedback
02/24/2020
HM Treasury has published for feedback a draft statutory instrument to implement the revised provisions for CCPs in the European Market Infrastructure Regulation (known as EMIR 2.2.) into U.K. law once the Brexit implementation period ends (currently scheduled for December 31, 2020). HM Treasury is publishing the draft instrument to provide Parliament and stakeholders the opportunity to provide feedback on the proposed approach before the instrument is laid before Parliament. The draft instrument–Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020–is due to be laid before Parliament in the Spring.
Read more.TOPIC : Brexit for Financial Services -
UK Prime Minister Sets Out Plan for Post-Brexit Relationship with EU
02/03/2020
The U.K. Prime Minister, Boris Johnson, has published a written statement on the U.K. Government’s proposed approach to negotiations on the U.K.’s future relationship with the EU. The U.K. formally left the EU on January 31, 2020 and entered an 11-month transition period, expiring on December 31, 2020, during which most EU legislation will continue to apply. The U.K. must now negotiate how the U.K. will interact with the EU after the end of the implementation period.
Read more.TOPIC : Brexit for Financial Services -
European Commission Takes First Step to Formally Open Negotiations With UK on Future Relationship
02/03/2020
The European Commission has published a Recommendation for a Decision by the Council of the European Union authorizing the opening of negotiations for a trade deal between the U.K. and the EU. The draft Recommendation authorizes the opening of the negotiations, appoints the Commission as negotiator and establishes a special committee for consultation. The annex to the draft Recommendation sets out the proposed negotiating directives and describes the EU's vision for its future relationship with the U.K., based on the EU-U.K. Withdrawal Agreement. Once the Council adopts the decision, the Commission will formally open the negotiations.
View the draft Recommendation and negotiating directives.TOPIC : Brexit for Financial Services -
EU Consultation on Draft Technical Standards For Third-Country Firm Registration and Disclosure Under MiFID II
01/31/2020
The European Securities and Markets Authority has launched a consultation on proposed draft Technical Standards on the provision of investment services and activities in the EU by third-country firms under the Markets in Financial Instruments package. The consultation closes on April 28, 2020 and ESMA intends to submit the final draft Technical Standards to the European Commission in Q3 2020.
The provisions in the Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation on third-country firms were recently amended. Among other things, the changes require third-country firms providing services to all types of clients to provide ESMA with further information. In addition, ESMA has increased powers over third-country firms providing services to eligible counterparties and per se professional clients, such as the ability to conduct on-site inspections and impose product restrictions or prohibitions.
ESMA's consultation paper covers the proposed:- draft Regulatory Technical Standards on the information for registration of third-country firms and the information to be reported annually by third-country firms registered with ESMA;
- draft Implementing Technical Standards on the format of applications for registration of third-country firms and the format of the information to be reported annually; and
- draft ITS on the format of the information to be reported annually to national regulators by branches of third-country firms.
View the consultation paper. -
European Securities and Markets Authority Confirms Brexit Implementation Period Requirements
01/31/2020
The European Securities and Markets Authority has released a statement confirming that, during the Brexit implementation or transitional period, the reporting and notification requirements for U.K. firms under EU legislation, such as the Markets in Financial Instruments package and the European Market Infrastructure Regulation, will continue to apply. In addition, ESMA will continue directly to supervise U.K. established credit rating agencies, trade repositories and securitization repositories until January 1, 2021. Under the EU-U.K. Withdrawal Act, the U.K. will leave the EU on January 31, 2020. However, EU laws will continue to apply in the U.K. until the end of the implementation period that will run from February 1, 2020 to December 31, 2020.
View ESMA's statement.TOPIC : Brexit for Financial Services -
Scope of Jurisdiction of Court of Justice Over UK Matters Confirmed
01/31/2020
The Court of Justice of the European Union has published a press release on the consequences for it of the U.K.'s withdrawal from the EU on January 31, 2020. The announcement confirms that U.K. judges will no longer serve the Court of Justice and of the General Court. The statement also confirms that the Court of Justice will continue to have jurisdiction in proceedings brought by or against the U.K. until the end of the implementation period (December 31, 2020). The Court will also have jurisdiction to give preliminary rulings on requests from U.K. courts that are made before the end of the implementation period.
View the press release.TOPIC : Brexit for Financial Services -
UK Conduct Regulator Confirms EU Regulatory Reporting Regime Applies During Brexit Implementation Period
01/30/2020
The U.K. Financial Conduct Authority has announced that during the Brexit implementation period, all existing regulatory reporting will continue under the EU regime. The FCA's announcement follows the adoption by the Council of the European Union of the Withdrawal Agreement on the same day, which means that the U.K. will leave the EU on January 31, 2020. Although the U.K. will have left the EU, EU law will apply in the U.K. until the transitional or implementation period ends on December 31, 2020. The FCA confirmed that EEA firms wanting to enter the Temporary Permissions Regime or fund managers wanting to continue to market funds in the U.K. under the Temporary Marketing Permissions Regime had until the end of the day on January 30, 2020 to notify the FCA.
View the FCA's announcement.TOPIC : Brexit for Financial Services -
UK Conduct Regulator Publishes Brexit-Related Updates to Handbook
01/30/2020
The U.K. Financial Conduct Authority has published a series of updates to the FCA Handbook relating to the U.K.’s exit from the EU on January 31, 2020.
Read more.TOPIC : Brexit for Financial Services -
EU Agrees Final Brexit Legislation
01/30/2020
Following the signature of the EU-U.K. Withdrawal Agreement on January 24, 2020, the European Central Bank has issued a statement expressing its regret that the U.K. is leaving the EU but stating its intention to ensure that Brexit causes the minimum disruption possible.
Read more.TOPIC : Brexit for Financial Services -
EU Adopts Withdrawal Agreement
01/30/2020
The Council of the European Union has adopted a decision to conclude the EU-U.K. Withdrawal Agreement. The European Parliament consented to the Agreement on January 29, 2020.
The Withdrawal Agreement will enter into force when the U.K. leaves the EU on January 31, 2020 (midnight CET / 11 p.m. GMT). Although the U.K. will have left the EU, it will still apply EU laws until December 31, 2020, which is the agreed transitional or implementation period under the Agreement.
View the Council's press release.TOPIC : Brexit for Financial Services -
UK Legislation Published Introducing Commencement of Brexit Withdrawal Act
01/29/2020
The European Union (Withdrawal Agreement) Act 2020 (Commencement No. 1) Regulations 2020 have been published by the U.K. Government. The Commencement Regulations establish “exit day” (January 31, 2020), as the day upon which certain provisions of the European Union (Withdrawal Agreement) Act 2020 will come into force, including provisions that give domestic legal effect to the Withdrawal Agreement and EEA EFTA separation agreement and those providing for the retention of existing grounds for deportation of relevant persons.
Read more.TOPIC : Brexit for Financial Services -
UK Legislation Published Delaying Brexit Transitional Regimes to End of Implementation Period
01/28/2020
The Financial Services (Consequential Amendments) Regulations 2020 have been published by the U.K. Government. The Regulations delay the application of various financial services temporary permissions and transitional regimes until the end of the implementation or transitional period (December 31, 2020) which was established under the European Union (Withdrawal Agreement) Act 2020. The Regulations come into force immediately before exit day, which is due to occur on January 31, 2020.
Read more.TOPIC : Brexit for Financial Services -
UK Government Confirms Aim of Achieving Equivalence for Financial Services by End June 2020
01/27/2020
HM Treasury has published a letter addressed to the Chair of the European Union Committee of the House of Lords concerning equivalence for financial services as a result of Brexit. In the letter, HM Treasury confirms that the priority for the U.K. Government is to obtain equivalence from the EU (and grant the same to the EU for U.K. purposes) by June 30, 2020 across all areas of the financial services sector where the EU framework currently provides for equivalence. There are just over 40 areas within the existing EU equivalence framework. This is in line with the EU-U.K. Withdrawal Agreement. The Withdrawal Agreement is subject to approval by the EU on January 29, 2020. The U.K. legislation to implement the Withdrawal Agreement, the European Union (Withdrawal Agreement) Act 2020, received Royal Assent on January 23, 2020.
HM Treasury also confirms that discussions have already been held with countries outside the EU regarding the U.K.'s equivalence framework and states that the U.K. could grant equivalence even where there is no EU equivalence, confirming the U.K.'s sovereign rights following Brexit.
View the letter.
You may like to view our client note: "The EU-UK Future Relationship: EU Announces its Timetable For Cross-Border Equivalence in Financial Services", dated January 15, 2020.TOPIC : Brexit for Financial Services -
UK Legislation Published Implementing Revised Brexit Deal
01/24/2020
The European Union (Withdrawal Agreement) Act 2020 has received Royal Assent and has been published by the U.K. Government. The EUWA Act 2020 implements the revised Withdrawal Agreement agreed between the EU and the U.K. last October and provides for that Agreement to have direct legal effect in the U.K. Subject to final EU sign-off, the U.K. is scheduled to leave the EU with this deal on January 31, 2020.
Read more.TOPIC : Brexit for Financial Services -
UK Regulator Outlines Priorities for Supervising Benchmark Administrators
01/24/2020
The U.K. Financial Conduct Authority has written to the CEOs of benchmark administrators that it supervises. In the letter, the FCA sets out its supervisory strategy as well as the potential harms that benchmark administrators pose to their customers and to the financial markets. The FCA is asking all benchmark administrators to consider the harm that their firm may present and to consider how those could be mitigated. The FCA intends to focus over the next two years on the following areas to ensure that its supervision of benchmark administrators mitigates the identified risks:- Quality of standards: the quality of an administrator's governance and controls, the information provided in their Benchmark Statement, their recalculation and cessation policies, their outsourcing arrangements and their approach to operational resilience; and
- Excessive fees and costs: the FCA is concerned that competition may not be working well in the provision of benchmarks following the feedback received to its Wholesale Sector Competition Review and Asset Management Market Study. The FCA intends to carry out a Call for Input on access to data in wholesale markets so that it can gain a better understanding of the issues and determine whether any action is needed.
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UK Conduct Authority to Review Suitability of Retirement Income Financial Advice
01/21/2020
The U.K. Financial Conduct Authority has announced the focus of its second review assessing suitability - advice received by consumers on retirement income. The FCA intends to publish a report on the outcome of the review in 2020. Alongside the announcement, the FCA has published a letter addressed to the CEOs of financial advice firms describing its approach to tackling key areas of concern with financial advice firms and setting out the action it expects these firms to undertake. The letter covers assessing suitability of advice, defined benefit pension transfer advice, pensions and investment scams, adequate financial resources and professional indemnity insurance, the FCA's recently imposed ban on the promotion of speculative mini-bonds to retail consumers, the Senior Managers and Certification Regime and preparing for the end of the Brexit implementation period.
View the FCA's statement.
View the Dear CEO letter. -
UK Conduct Authority Halts UK Operation of MiFID Transparency Regime in Light of Commitment to Brexit Deal
01/20/2020
The U.K. Financial Conduct Authority has updated its webpage and statement on the operation of the transparency regime under the Markets in Financial Instruments Directive post-Brexit. The U.K. Government has stated that it is committed to leaving the EU with a deal on January 31, 2020, followed by an implementation period. As a result, the FCA confirms that during the implementation period, all MiFID systems will remain connected to the European Securities and Markets Authority. A further update will be provided in due course.
View the FCA's updated statement. -
EU Temporary Equivalence and Recognition for UK CCPs Extended in Event of a No-Deal Brexit
12/23/2019
An amended temporary equivalence decision on the regulatory framework applicable to central counterparties in the U.K. and Northern Ireland has been published in the Official Journal of the European Union. The decision amends the existing EU equivalence decision, which applies from the date that the U.K. leaves the EU in the event that no withdrawal agreement has been agreed, and ends on March 30, 2020. The amended decision extends the period of equivalence to one year following a U.K. no-deal exit from the EU and will apply from December 24, 2019. It would not apply in the event that the Withdrawal Agreement is ratified by both sides.
Read more. -
European Parliament Publishes Resolution on EU Financial Services Regulation for Third Countries
12/23/2019
The European Parliament has published a resolution on relationships between the EU and third countries concerning financial services regulation and supervision. The resolution follows the publication of a report in August 2018 by the European Parliament’s Committee on Economic and Monetary Affairs setting out its proposal for the European Parliament’s resolution, which comes in the wake of the U.K.’s upcoming exit from the EU. The key factors prompting the resolution include the need to mitigate risks to financial stability arising from a possible no-deal Brexit, the need for clarification of the relationship between third-country markets and the EU’s single market in the interests of broader financial stability and the fact that existing third-country equivalence rules are not currently subject to a single framework.
Read more. -
UK Financial Policy Committee Highlights Risks of Open-Ended Funds and Global Stablecoins
12/16/2019
The Financial Policy Committee of the Bank of England has published its latest financial stability report. The report sets out the FPC's view of the resilience of the U.K. financial system and the main risks to the U.K.'s financial stability as well as the work being carried out to address those risks. The FPC states that the 2019 annual cyclical scenario stress test indicates that the U.K. banking system would be resilient to deep simultaneous U.K. and global recessions. Furthermore, the U.K. financial system is resilient to and prepared for any disruptions that may arise from a disorderly Brexit.
Read more. -
EMIR 2.2 Regulation on the Authorization and Recognition of CCPs Published
12/12/2019
A new Regulation amending the European Market Infrastructure Regulation has been published in the Official Journal of the European Union, introducing changes to the procedures and authorities involved in the authorization of central counterparties and the requirements for the recognition of third-country CCPs. The Regulation, known as “EMIR 2.2”, is part of the EU’s push to enhance the regulation of CCPs amid concerns regarding potential CCP failures given their increasing systemic importance.
Read more. -
UK Conduct Regulator Publishes Consultation on Proposed Miscellaneous Changes to Rules
12/06/2019
The U.K. Financial Conduct Authority has published a consultation on its proposed changes to various aspects of the FCA Handbook.
Read more. -
European Commission Vice President Addresses CCP Temporary Equivalence and Sustainable Finance in London Speech
11/15/2019
The Vice President of the European Commission, Valdis Dombrovskis, has given a keynote speech at the Guildhall in London covering, amongst other things, the EU’s proposals for the development of the European sustainable finance framework and a proposed extension to the temporary equivalence regime for U.K. central counterparties.
Read more. -
Final EMIR 2.2 Technical Advice Published
11/11/2019
Following its consultation earlier this year, the European Securities and Markets Authority has published final reports and the final technical advice on third-country CCP tiering, comparable compliance and fees under draft revisions to the European Market Infrastructure Regulation, known as EMIR 2.2. EMIR 2.2 will change the requirements for the supervision of both EU and third-country CCPs, and includes the controversial formal EU "location policy" for CCPs. The technical advice will assist the Commission in preparing the final delegated legislation that will supplement the EMIR 2.2.
Read more. -
HM Treasury Publishes Equivalence Determinations for EU Financial Services Legislation
11/06/2019
HM Treasury has published the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, providing U.K. government ministers with a temporary power to make equivalence and exemptions directions for the EU and EEA Member States under relevant financial services legislation. The temporary power will come into force on the date that the U.K. leaves the EU (currently expected to be no later than January 31, 2020) and can only be used for up to twelve months from that date.
Read more.TOPIC : Brexit for Financial Services -
UK Conduct Regulator Postpones Implementation Date for Brexit Contingency Plans
10/30/2019
The U.K. Financial Conduct Authority has extended the date by which firms must implement Brexit contingency plans following the extension of the Brexit deadline from October 31, 2019 to January 31, 2020. Firms and funds should now notify the FCA for entry into the temporary permissions regime by January 30, 2020 and fund managers have until January 15, 2020 to notify the FCA if they wish to change their existing notification. Firms should continue to comply with transaction and trade reporting requirements under the Markets in Financial Instruments Directive and European Market Infrastructure Directive, respectively.
View the FCA's statement on contingency planning deadlines. -
UK Government Agrees Extension of Brexit Deadline With European Union
10/30/2019
The U.K. Government has published legislation extending the deadline for the U.K.'s withdrawal from the European Union, following an agreement reached with relevant European Union bodies on the extended Brexit deadline. The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No. 3) Regulations 2019 amend the day of the U.K.'s exit from the European Union from October 31, 2019 to January 31, 2020, granting the U.K. government an additional three months in which to ratify its proposed Brexit deal.
Read more.TOPIC : Brexit for Financial Services -
UK Conduct Regulator Further Extends Deadline for E-Money and Payment Services Temporary Permissions Notifications
10/30/2019
The U.K. Financial Conduct Authority has published two amending Directions under the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 extending the deadlines by which e-money and payment services firms should notify the FCA of their intention to rely on the temporary permissions regime following the U.K.’s exit from the EU. These firms should now make notifications by January 30, 2020. The extended deadline falls immediately before the revised Brexit deadline of January 31, 2020.
View the FCA's amended Direction on notifications for the e-money services temporary permissions regime.
View the FCA's amended Direction on notifications for the payment services temporary permissions regime. -
UK Regulator Publishes Final Technical Standards on Strong Customer Authentication in the Event of a No-Deal Brexit
10/25/2019
The U.K. Financial Conduct Authority has published a Policy Statement, final Technical Standards and changes to the Handbook rules on strong customer authentication and common and secure open standards of communication to be applicable when the U.K. leaves the EU. The FCA consulted on the proposed SCA RTS in early 2019 when the U.K. was due to leave the EU on March 29, 2019, and before the EU SCA Regulatory Technical Standards application date. Since then, Brexit has been extended and the EU SCA RTS has applied directly across the EU since September 14, 2019. As a result, the EU SCA RTS would be onshored into U.K. law under the Withdrawal Act. However, in preparation for a no-deal Brexit, the U.K. Payment Services Regulations would require firms to apply the U.K. SCA RTS. As a result, the EU SCA RTS would be revoked and the FCA's SCA RTS will apply in the U.K. in the event of a no-deal Brexit.
Read more. -
EU and UK Agree Revised Brexit Deal
10/19/2019
The EU and U.K. have, in principle, agreed new terms for the withdrawal agreement giving effect to the U.K.'s exit from the European Union. These include a revised political declaration and protocol concerning Northern Ireland replacing the controversial backstop. An amended unilateral declaration on consent in Northern Ireland by the U.K. has also been published. The new Withdrawal Agreement provides for a transitional period from the day the U.K. exits the EU until December 31, 2020. That period may be extended for a period of one to two years, if agreed between the EU and the U.K by July 31, 2020.
View the revised Withdrawal Agreement and Political Declaration.
View our client note providing comparisons to the previous versions.TOPIC : Brexit for Financial Services -
EU Council Adopts Laws on Enhanced Supervision of Third-Country CCPs
10/15/2019
The Council of the European Union has adopted the amendments to EU law on CCP supervision. The adopted laws revising the European Market Infrastructure Regulation (EMIR 2.2) will change how both EU CCPs and third-country CCPs are supervised, and implement into legislation the controversial EU "location policy" for the largest third-country CCPs. According to the Council's press release, EMIR 2.2 is scheduled to be published in the Official Journal of the European Union on December 12, 2019 and would come into force 20 days later. The legislative process relevant to EMIR 2.2 has taken place with the U.K. exit from the European Union in the background and many of the changes relevant to third-country CCPs are effectively a response to the U.K.'s decision to leave the EU, given that two of the three largest European Union clearing houses are U.K.-based.
Read more. -
UK Financial Policy Committee Issues Summary of UK Financial System
10/11/2019
The U.K. Financial Policy Committee has issued a summary of the resilience of the U.K. financial system to potential economic shocks and the vulnerabilities it faces. The summary follows the FPC’s meeting on October 2, 2019, at which the FPC agreed on its intended policy action going forward. The FPC is made up of Bank of England staff, the Chief Executive of the U.K. Financial Conduct Authority and certain external members who work to identify, monitor and take action to remove or reduce systemic risks to the U.K. financial system.
Read more. -
Brexit: European Banking Authority Again Warns Against Letter-Box Entities
10/08/2019
The European Banking Authority has issued a further Communication on issues associated with the U.K.'s withdrawal from the EU, scheduled to take place on October 31, 2019. The EBA notes that financial institutions have made progress on their preparations for a no-deal Brexit. However, national regulators have highlighted concerns about the operationalization of relocation plans and customer communication. In particular, national regulators have noted that in some cases authorization has been obtained, but it remains unclear whether the firm has transferred assets, skilled staff and risk function to fully operationalize the new business. The EBA reminds firms of the principles it set out in its October 2017 Opinion on structures, and particularly the need for firms not to set up so-called "empty shells".
Read more. -
European Securities and Markets Authority Issues Public Statements on No-Deal Brexit Preparations
10/07/2019
The European Securities and Markets Authority has issued four public statements on its preparations for a no-deal Brexit in the event the U.K. fails to agree a deal with the EU or extend the Brexit deadline before October 31, 2019. In its public statement on preparations for a possible no-deal Brexit, ESMA notes that it had already put in place no-deal contingency plans ahead of the U.K.’s previous Brexit deadline extension on April 10, 2019.
Read more. -
UK Regulator Update on the Operation of the MiFID Transparency Regime Post-Brexit
10/07/2019
The U.K. Financial Conduct Authority has published an update to the Supervisory Statement on the operation of the transparency regime under the Markets in Financial Instruments Directive post-Brexit. The FCA published a statement on March 14, 2019 on the operation of the MiFID II transparency regime should the U.K. leave the EU without a deal on March 29, 2019. The FCA has updated the statement to reflect how the regime would work if the U.K. leaves the EU on October 31, 2019, without a deal.
View the FCA's update.
View details of the FCA's March 2019 Supervisory Statement. -
UK Conduct Regulator Issues Draft Directions on No-Deal Brexit Temporary Transitional Power
09/26/2019
The U.K. Financial Conduct Authority has updated the directions under the temporary transitional power granted to it in preparation for a no-deal Brexit. The TTP was granted to the U.K. regulators under the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 as a means of granting transitional relief from regulatory requirements where the requirements have been introduced or have changed as a result of onshoring financial services legislation. In July 2019, the FCA announced an extension of its use of the TTP from June 30, 2020 to December 31, 2020 in light of the change to the date that the U.K. was due to leave the EU to October 31, 2019. The updated directions reflect that extension as well as prudential instruments that have been published since the draft directions were originally published in March 2019.
View the FCA's press release and the related documentation.TOPIC : Brexit for Financial Services -
No-Deal Brexit Uncertainty Leads EU to Suspend Assessment of Transparency Requirements on Bond Markets
09/24/2019
The European Securities and Markets Authority has confirmed in a letter to the European Commission that it considers it inadvisable to conduct an annual review in 2019 of the Regulatory Technical Standards on the transparency requirements for trading venues and investment firms for bonds, structured finance products, emission allowances and derivatives (sometimes referred to as RTS 2). The requirement for an annual review is stipulated in the Markets in Financial Instruments package, and ESMA's report could lead to legislative changes subjecting more bonds and derivatives to the transparency requirements. ESMA's assessment of RTS 2 would be impacted by the uncertainty arising from Brexit, in particular, the potential for a no-deal Brexit, because the outcome would vary depending on whether U.K. data was included or not.
ESMA intends to conduct its annual review before July 2020 and to determine the impact on bond market liquidity of the U.K.'s departure from the EU.
View ESMA's letter to the European Commission. -
UK Prudential Regulator Consults on Credit Risk
09/18/2019
The U.K. Prudential Regulation Authority has launched a consultation on its approach to implementing the European Banking Authority's Technical Standards and Guidelines on Probability of Default estimation, Loss Given Default estimation and the treatment of defaulted exposures in the Internal Ratings Based approach to credit risk. The consultation is relevant to U.K. banks, building societies and PRA-designated U.K. investment firms. Responses to the consultation need to be submitted by December 18, 2019.
Read more. -
UK Conduct Regulator Escalates Awareness of Need for No-Deal Brexit Preparations
09/11/2019
The U.K. Financial Conduct Authority has published a press release announcing that it is stepping up its efforts to assist firms to prepare for a no-deal Brexit. Among other things, the FCA will be publishing a series of digital advertisements highlighting the FCA Brexit webpages, and it has set up a dedicated telephone line (0800 048 4255).
View the FCA's press release.TOPIC : Brexit for Financial Services -
UK Statutory Instrument Published to Onshore the EU Prospectus Regulation For No-Deal Brexit
09/06/2019
A U.K. statutory instrument has been published to onshore the EU Prospectus Regulation in the event of a no-deal Brexit. In preparing for an April Brexit, the U.K. had onshored the EU Prospectus Directive in the Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019 (known as the "Official Listing instrument"). However, since then the date on which the U.K. is due to leave the EU has changed to October 31, 2019 and the EU Prospectus Directive has been repealed by the EU Prospectus Regulation (as of July 21, 2019).
Read more.TOPIC : Brexit for Financial Services -
UK No-Deal Brexit Legislation Extends Transitional Provisions for Third-Country Benchmarks
09/06/2019
A U.K. statutory instrument has been published to further the U.K.'s financial services legislation preparations in the event of a no-deal Brexit. The statutory instrument – the Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019 (SI 2019/1212) – provides for, among other things:- amending the exit legislation that establishes temporary regimes for EEA e-money and payment services firms to ensure that firms entering the Contractual Run-Off regime can carry out the full range of activities required to discharge any pre-existing contractual obligations;
- extending the transitional provisions for third-country benchmarks in the Benchmarks (Amendment and Transitional Provisions) (EU Exit) Regulations 2019 by three years to ensure that U.K. firms can use third-country benchmarks until the end of 2022 without the benchmarks needing to be on the Financial Conduct Authority's register;
- updating cross-references to the Capital Requirements Regulation to take into account the EU amendments to the CRR that became applicable in June 2019; and
- amending various exit instruments to correct or clarify the original text.
View the amending regulation and explanatory memorandum.TOPIC : Brexit for Financial Services -
UK Brexit Legislation Published to Onshore the Revised Capital Requirements Regulation
09/05/2019
A draft U.K. statutory instrument to onshore into U.K. law, post-Brexit, the revised Capital Requirements Regulation (known as CRR II) has been published – the Capital Requirements (Amendment) (EU Exit) Regulations 2019 (2019 No. 1232). CRR II and the revised Capital Requirements Directive were published in the Official Journal of the European Union on June 7, 2019. Subject to certain exceptions, the Regulation amending CRR will not apply directly across the EU from June 28, 2021. However, some of its provisions are already in force. EU Member States are required to transpose the Directive amending CRD into their national laws and to apply those provisions from December 29, 2020, subject to certain exceptions.
The new U.K. statutory instrument amends the existing U.K. exit legislation to address deficiencies arising due to the changes made in CRR II, but only those changes that will be applicable by October 31, 2019. These changes relate to new definitions, revisions to the rules on what qualifies as capital, new mandates for technical standards to be prepared and some changes to the Minimum Requirements for Own Funds and Eligible Liabilities (MREL). In addition, the statutory instrument removes the automatic preferential capital treatment for EU exposures introduced by CRR II. This aligns with the position taken in the existing exit legislation. It is anticipated that in the event of a no-deal Brexit, the U.K. regulators may use their temporary powers to suspend the additional capital requirements for such exposures.
View the amending regulation and explanatory memorandum.
View details of CRR II.TOPIC : Brexit for Financial Services -
European Commission Issues Communication on Final Preparations for No-Deal Brexit
09/04/2019
The European Commission has published a Communication on finalizing preparations for the withdrawal of the U.K. from the EU on November 1, 2019. The Commission stresses the likelihood of a no-deal Brexit on October 31, 2019 and asks all stakeholders to take action now to finalize their plans for the situation, noting that the contingency measures that are in place can only mitigate against some of the more significant disruptions. The Commission warns that a further delay to the date that the U.K. exits the EU should not be assumed, in that a delay may not be requested by the U.K. government nor granted by the EU.
Read more. -
UK Conduct Regulator Amends Directions for E-Money and Payment Services Temporary Permissions Regime
07/31/2019
The U.K. Financial Conduct Authority has published two amending Directions under the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 varying the deadlines by which e-money and payment services firms should notify the FCA of their intention to rely on the temporary permissions regime following the U.K.’s exit from the EU. The TPR will allow EU firms to continue providing financial services in the U.K. post-Brexit for a limited period of time, pending full FCA permission being granted. Notifications should now be made by October 30, 2019. The extended deadline falls immediately before the revised Brexit deadline of October 31, 2020.
View the FCA's amended Direction on notifications for the e-money services temporary permissions regime.
View the FCA's amended Direction on notification for the payment services temporary permissions regime.
View details of the FCA’s extended TPR announcement on April 11, 2019.
View details of the FCA’s extended TPR announcement on March 28, 2019. -
EU Credit Rating Equivalence Decisions Repealed for Some; Reaffirmed for Others
07/30/2019
A series of Implementing Decisions on the equivalence with the EU Credit Rating Agencies Regulation of the credit rating regimes of certain non-EU countries have been published in the Official Journal of the European Union. The EU CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may only use credit ratings for certain regulatory purposes if a rating is issued by: (i) an EU CRA registered with the European Securities and Markets Authority; (ii) a third-country CRA under the endorsement regime; or (iii) a third-country CRA under the equivalence/certification regime. Equivalence decisions for several jurisdictions were adopted in 2012 under the CRA Regulation, as it was at the time. The equivalence decisions were for Brazil, Canada, Argentina, Singapore, Australia, Mexico, the U.S., Japan and Hong Kong. CRAs from Mexico, the U.S. and Japan subsequently obtained certification from ESMA.
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UK Conduct Regulator Consults on STS Notifications under Onshored Securitization Regulation
07/30/2019
The U.K. Financial Conduct Authority has launched a consultation on draft technical standards on the content and format of STS notifications under the U.K.'s onshored Securitization Regulation. The consultation closes on August 27, 2019. Unless Brexit is delayed further, the FCA intends to publish the final or near-final technical standards on or very near to Exit day, which is currently due to be October 31, 2019.
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European Commission Communicates on Financial Services Equivalence
07/29/2019
The European Commission has published a Communication on equivalence in the area of financial services, including an annex that briefly sets out the equivalence decisions adopted by the Commission since January 2018. The Communication describes the Commission's current equivalence policy priorities, recent legislative improvements and the main assessment and the decision-making processes. It also sets out recent and ongoing work on equivalence assessments and monitoring.
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UK Conduct Regulator Extends Period for Use of Its Brexit Temporary Transitional Power
07/25/2019
The U.K. Financial Conduct Authority has announced that it will extend its use of the temporary transitional power from June 30, 2020 to December 31, 2020 in light of the change to the date that the U.K. is due to leave the EU to October 31, 2019.
Read more.TOPIC : Brexit for Financial Services -
UK Regulators Consult on Amending EU Exit Instruments
07/25/2019
The Bank of England and the Prudential Regulation Authority have opened a consultation on further changes to EU Exit instruments following the extension of Brexit from April to October 31, 2019, which means that certain EU legislation that has been published since April will become retained law. The consultation closes on September 18, 2019.
The consultation covers: (i) a proposed update on the Bank's and PRA's intended use of the temporary transitional power; (ii) proposals for the PRA Rulebook and Binding Technical Standards that will be retained, or 'onshored', in U.K. law; and (iii) the Bank's proposed BTS under the Central Securities Depositories Regulation.
Read more.TOPIC : Brexit for Financial Services -
UK Draft Legislation for Post-Brexit EMIR 2.1 Published
07/25/2019
A draft U.K. statutory instrument to onshore into U.K. law, post-Brexit, the revised European Market Infrastructure Regulation (known as EMIR Refit) has been published - The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) (No. 2) Regulations 2019.
EMIR Refit was published in the Official Journal of the European Union on May 28, 2019 and, for the most part, has applied directly across the EU since June 17, 2019.
Read more. -
Certain UK Brexit Regulations Updated and Amended
07/16/2019
The draft U.K. Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 3) Regulations 2019 have been published.
Read more.TOPIC : Brexit for Financial Services -
European Banking Authority Publishes Report on FinTech's Impact on Payment and Electronic Money Institutions' Business Models
07/08/2019
The European Banking Authority has published a report on the impact of financial technology on the business models of payment and electronic money institutions. The report aims to provide an overview of the current FinTech landscape and raise awareness of the main trends affecting business models. It follows major developments in the industry including the introduction of the revised Payment Services Directive (known as PSD2), the emergence of new market entrants offering innovative products and the growth of instant and mobile payment methods.
Read more. -
European Securities and Markets Authority Postpones Review of Transparency Requirements under MiFIR
06/17/2019
The European Securities and Markets Authority has postponed its review of the operation of transparency requirements laid out under Regulatory Technical Standards issued under the Markets in Financial Instruments Regulation. MiFIR's transparency regime obliges those providing investment services in the EU to disclose details of their transactions in bonds, structured finance products, emission allowances and derivatives both prior to, and following, trades. The detail of how participants should comply with this transparency regime is set out in the related delegated acts and technical standards published under MiFIR. Under the MiFIR RTS, ESMA is obliged to submit a report on the operation of thresholds for the liquidity and trade percentiles of certain financial instruments by July 30 each year. However, given the continuing uncertainties over Brexit, ESMA considers it would be inappropriate to perform the review by the usual deadline, particularly as the results of its review may lead to a tightening of the relevant rules. No new deadline for performing the review has yet been established.
View ESMA's letter.
View the transparency RTS. -
UK Conduct Regulator Publishes Dear CEO Letter on its Wealth Management and Stockbroking Supervision Strategy
06/13/2019
The U.K. Financial Conduct Authority has published a "Dear CEO" letter addressed to wealth management and stockbroking firms, identifying the key areas of focus for its two-year Wealth Management and Stockbroking supervision strategy. In the letter, the FCA identifies the four key types of harm for customers in this sector as: (i) reductions in savings and investments due to fraud, investment scams and inadequate client money or assets controls; (ii) loss of confidence in the industry due to mismanagement of conflicts of interest and market abuse; (iii) reductions in savings and investments due to substandard order handling procedures and execution processes; and (iv) inability to understand the costs of services provided by firms as a result of insufficient or inaccurate disclosure.
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UK To Adopt Amendments to Brexit Legislation
06/10/2019
HM Treasury has laid before Parliament a draft of the Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019. The draft Regulations make amendments to certain elements of the EU exit legislation relating to financial services that has been developed by the U.K. government in preparation for the U.K.'s exit from the EU. The amendments will come into force on the later of: (i) the day after the day on which the Regulations are made; and (ii) immediately before exit day or, in the case of the amendment to the Capital Requirements Regulations, exit day.
Read more.TOPIC : Brexit for Financial Services -
UK Regulator Publishes Policy Statement on Supervisory and Enforcement Process for Securitization Repositories, including post-Brexit
06/06/2019
The U.K. Financial Conduct Authority has published a Policy Statement setting out the final rules governing the FCA's authority to impose sanctions on persons for breaching requirements imposed under the U.K. Securitization Regulations 2018, which implements the EU Securitization Regulation. The Policy Statement also includes proposals on how the FCA will apply its existing supervisory and enforcement processes to securitization repositories (the bodies responsible for collecting and maintaining records of securitizations) after the U.K.'s exit from the EU.
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Revised EU Statement on the Share Trading Obligations in a No-Deal Brexit
05/29/2019
Following concerns regarding its March 19, 2019 statement, the European Securities and Markets Authority has published a revised statement on the impact of a no-deal Brexit on the trading obligation for shares where no decision on the U.K.'s equivalence as a third country market has been made. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The U.K. has adopted this requirement in its onshored MiFID II legislation. Similarly, following its exit from the EU, the new U.K. on-shored share trading obligation would restrict trading of shares in the U.K. to trades on U.K. trading venues unless a third-country equivalence decision was made.
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Guidance on Post-Brexit Counter-Terrorism Regulations Issued by UK Government
05/03/2019
The Foreign and Commonwealth Office has issued guidance on the Counter-Terrorism (International Sanctions) (EU Exit) Regulations 2019, the proposed U.K. regulations that will govern the U.K.'s application of international sanctions following the U.K.'s withdrawal from the EU. The Regulations will apply within the U.K. and relate to the conduct of U.K. persons (i.e. British nationals and legal entities incorporated in the U.K.), wherever those persons may be situated in the world (including branches of U.K. companies operating overseas).
Read more. -
UK Government Consults on Implementation of the EU Fifth Money Laundering Directive
04/15/2019
HM Treasury launched a consultation on its proposed options for transposing the Fifth Money Laundering Directive into U.K. law. 5MLD makes a number of changes to the European Anti-Money Laundering and Counter-Terrorist Financing regime set out in the Fourth Money Laundering Directive. EU Member States are required to transpose 5MLD into national laws, which must take effect by January 10, 2020. HM Treasury is consulting on how it proposes to effect the transposition, in particular where the U.K. has discretion as to how certain aspects are implemented and where gold plating provisions are proposed. Notably, the U.K. government intends to implement 5MLD irrespective of when the U.K. leaves the EU, and is committed to implementing the Financial Action Task Force's standards, focusing on those areas highlighted in the FATF's mutual evaluation report of the U.K.'s AML/CTF regime. Responses to the consultation were to be submitted by June 10, 2019.
Read more. -
UK's Exit from EU Postponed to October 31, 2019
04/11/2019
The EU and the U.K. have agreed to postpone the date on which the U.K. will leave the EU from April 12, 2019 to October 31, 2019. The U.K. notified the EU under Article 50 of the Treaty on the European Union on March 29, 2017 that it would leave the EU. That notification set the date for the U.K.'s exit as March 29, 2019, unless an agreement was reached between the U.K. and the EU. That date was amended by agreement to April 12, 2019 on March 22, 2019. This is the second postponement.
The EU has implemented the postponement in European Council Decision (EU) 2019/584 taken in agreement with the United Kingdom of 11 April 2019 extending the period under Article 50(3) TEU. The U.K. implemented the extension through the European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No. 2) Regulations 2019, which amended the European Union (Withdrawal) Act 2018.
View the Council's Decision.
View the U.K. Regulations.TOPIC : Brexit for Financial Services -
US Commodity Futures Trading Commission Issues No-Action Letters to Ensure Continued Relief and Substituted Compliance for U.K. Firms Post-Brexit
04/05/2019
The Commodity Futures Trading Commission has issued two no-action letters to ensure that existing regulatory relief and substituted compliance measures for EU firms will continue to apply to U.K. firms following the U.K.’s departure from the EU. The CFTC said that the no-action letters will bring greater clarity to the market in light of Brexit and reflect the CFTC’s commitment to ensuring that Brexit will not create regulatory uncertainty in global derivatives markets. The relief is intended to cover both “no-deal” and “soft” Brexit scenarios. The relief would apply upon the departure of the U.K. (and would thus take effect at the end of the most recent extension of the departure date to October 31, 2019).
CFTC Letter 19-08 extends to U.K. entities substituted compliance measures originally issued for EU entities. These measures include comparability determinations for certain entity-level, transaction-level and uncleared margin requirements (the EU Comparability Determinations), along with an exemption for EU-authorized multilateral trading facilities and organised trading facilities from the CFTC’s swap execution facility registration requirements.
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UK Financial Conduct Authority Implements Permanent Ban of Sale of Binary Options to Retail Consumers
03/29/2019
Following its recent consultation, the U.K. Financial Conduct Authority has published a Policy Statement, final rules and a Statement on the new product intervention measure it is introducing for retail binary options. Both contracts for difference and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by certain providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000 allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The FCA also consulted on product intervention rules for CfDs and those final rules are expected to be published in April this year.
Read more. -
UK Prudential and Conduct Regulators Extend Deadline for Temporary Permissions Notifications by EEA Firms
03/28/2019
The U.K. Prudential Regulation Authority and U.K. Financial Conduct Authority have extended their deadlines for PRA- and FCA-regulated EEA firms to make notifications that they wish to utilize the temporary permissions regime for providing financial services in the U.K. following Brexit if no implementation or transitional period is agreed under the Withdrawal Agreement. Firms now have until April 11, 2019 to make their notification.
Read more.TOPIC : Brexit for Financial Services -
UK Conduct Regulator Publishes Post-Brexit Temporary Permissions Rules
03/28/2019
The U.K. Financial Conduct Authority has published the Exiting the European Union: Temporary Permission and Financial Services Contracts Instrument 2019, which amends the FCA Handbook to accommodate firms subject to the temporary permissions regimes that will apply following the U.K.’s exit from the EU. The amendments will come into force on the day the U.K. exits the EU, with the exception of certain provisions of the FEES manual, which will apply from the later of (i) April 1, 2019 and (ii) exit day.
Non-Handbook guidance
The Instrument also contains non-Handbook guidance specifying that the FCA expects incoming EEA-based firms within the TPR or supervised run-off firms in the Financial Services Contracts Regime to communicate with customers about any material changes to their home state investor compensation scheme coverage as a result of Brexit.
View the Exiting the European Union: Temporary Permission and Financial Services Contracts Instrument 2019.TOPIC : Brexit for Financial Services -
US Regulators Offer Margin Relief for Legacy Swaps No Deal Brexit Scenario
03/25/2019
The Commodity Futures Trading Commission has unanimously approved an interim final rule that will allow swap dealers and major swap participants to, in the event of a no-deal Brexit scenario, transfer legacy swaps entered into before the compliance date of the CFTC's margin requirements for uncleared swaps to an affiliate without triggering such requirements. The CFTC's interim final rule is substantively identical to an interim final rule adopted by the U.S. Prudential Regulators, which provides the same relief for legacy swaps entered into before the compliance date of their margin requirements for uncleared swaps.
Both interim final rules apply only to legacy swaps that are transferred solely for relocation purposes. They do not cover economic changes to legacy swaps, such as amendments that modify payment amount calculation methods, maturity date or notional amount of the uncleared swap.
The interim final rules are each effective immediately upon their respective publication in the Federal Register, and the transfer relief will apply for a period of one year following the U.K.'s withdrawal from the EU in the event of a no deal Brexit.
Read more. -
European Council Publishes Brexit Extension Decision
03/22/2019
The European Council has published its decision to extend the deadline for the U.K.’s withdrawal from the EU until May 22, 2019, provided that the Withdrawal Agreement passes through the House of Commons by March 29, 2019.
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​No-Deal Brexit Changes to UK Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules
03/22/2019
The Financial Conduct Authority has published a market bulletin that advises issuers and stakeholders of key changes to the Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules that will apply in the event of a no-deal Brexit.
In the event of a no-deal Brexit, the U.K.’s primary market regime will apply to all issuers that have securities admitted to trading, or have applied for admission to trading, on a U.K.-regulated market or admitted to listing in the U.K., or that are making a public offer in the U.K. The rules will apply regardless of the country an issuer is incorporated in.
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UK Prudential Regulator Announces Details of Post-Brexit Temporary Permissions Regime for EEA Firms
03/22/2019
The U.K. Prudential Regulation Authority has published details of the temporary permissions regime that will allow PRA-regulated EEA firms to continue providing financial services in the U.K. for a limited period following the U.K’s exit from the EU, in the event that no implementation or transitional period is agreed under the Withdrawal Agreement. The EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 brought the TPR into force on November 7, 2018. The TPR applies to EEA firms that are authorized to conduct a regulated activity in the U.K. using passporting rights and have either: (i) applied for U.K. authorization prior to the U.K. withdrawal date; or (ii) notified the relevant U.K. regulator of their intention to continue conducting passported activities. Such firms will be entitled to continue providing financial services for up to three years from the date the U.K. leaves the EU.
Read more.TOPIC : Brexit for Financial Services -
Bank of England Announces Details of Post-Brexit Temporary Recognition Regimes for CCPs and CSDs
03/22/2019
The Bank of England has published details of its prospective new role as supervisor of financial markets infrastructure at the end of the implementation period following the U.K.’s exit from the EU.
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UK Conduct Regulator Publishes Supplementary Directions for E-Money and Payment Services Temporary Permissions Regime
03/22/2019
The U.K. Financial Conduct Authority has published two supplementary Directions under the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 specifying that notifications by e-money and payment services firms wishing to take advantage of the FCA’s temporary permissions regime will not be valid if they are withdrawn in writing prior to exit day. The FCA has previously issued Directions setting out how such firms should notify the FCA of their intention to make use of the temporary permissions regime.
View the FCA's supplementary Direction on withdrawal of notifications by e-money services firms.
View the FCA's supplementary Direction on withdrawal of notifications by payment services firms.
View details of the FCA’s Directions for notifications by e-money and payment services firms. -
EU Statement on the Impact of a No-Deal Brexit on the Share Trading Obligation
03/19/2019
May 29, 2019 update: ESMA's guidance of March 19, 2019 has been superseded by revised guidance issued, details of which are available here.
The European Securities and Markets Authority has published a statement on the impact of a no-deal Brexit on the trading obligation for shares. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The requirement is not applicable to transactions in shares traded in the EU on a non-systematic, ad-hoc, irregular and infrequent basis. ESMA's statement is relevant should there be a no-deal Brexit (currently set for March 29, 2019) and there is no equivalence decision for the U.K.
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UK Allows Post-Brexit Endorsement of Credit Ratings From the EU
03/15/2019
The U.K. Financial Conduct Authority has published a statement confirming that the EU regime for credit rating agencies is "at least as stringent" as the U.K.'s regime, post-Brexit. The U.K. CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may use credit ratings for certain regulatory purposes if a rating is issued by a third-country CRA under the endorsement regime. The FCA considers that the EU regime meets the conditions for endorsement. This will allow U.K.-registered CRAs to endorse credit ratings into the U.K. from EU affiliates for regulatory use under the U.K. CRA Regulation. The European Securities and Markets Authority has announced today that the U.K. regime has been positively assessed for endorsement under the EU CRA Regulation.
In addition, in preparation for a no-deal Brexit, the U.K. is establishing (i) a conversion regime for U.K. and third-country CRAs currently registered or certified by ESMA; and (ii) a temporary registration regime for newly established U.K. entities that are part of a group of CRAs with an existing ESMA registration before exit day.
View the FCA's statement on endorsement of EU credit ratings.
View details of ESMA's statement on endorsement of U.K. credit ratings. -
EU Positive Assessment of UK Post-Brexit Regime Paves Way for Endorsement of UK Credit Ratings
03/15/2019
The European Securities and Markets Authority has published a further statement on the implications of a no-deal Brexit for U.K. credit rating agencies. The CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may use credit ratings only for certain regulatory purposes if a rating is issued by: (i) an EU CRA registered with ESMA; or (ii) a third-country CRA under the endorsement regime or the equivalence/certification regime. U.K. CRAs will lose their EU registration when the U.K. leaves the EU on a "hard Brexit."
Read more. -
UK Conduct Regulator Publishes Statement on Operating MiFID II Transparency Regime Post-Brexit
03/14/2019
The U.K. Financial Conduct Authority has published a Supervisory Statement on the operation of the transparency regime under the Markets in Financial Instruments Directive post-Brexit. The Statement sets out how the FCA will operate the pre- and post-trade transparency regime for the secondary markets in the event of a no-deal Brexit on March 29, 2019. The U.K.'s onshored MiFID II provides the FCA with transitional powers, for a period of four years, on how to run the transparency regime as the FCA does not yet have the technology to make the same calculations and assessments that ESMA carries out.
View the FCA's statement. -
Further EU Clarification For Financial Services Firms in a No Deal Brexit
03/07/2019
The European Securities and Markets Authority has published a statement on its approach to certain provisions of the Markets in Financial Instruments package and the Benchmarks Regulation in the event of a no-deal Brexit.
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European Banking Authority Publishes Revised Guidelines on Outsourcing Arrangements
02/25/2019
The European Banking Authority has published revised Guidelines on outsourcing arrangements. The guidelines are intended to update and replace outsourcing guidelines issued in 2006 (by the EBA's predecessor, the Committee of European Banking Supervisors) on outsourcing by credit institutions. The EBA Guidelines have a wider scope, applying to all financial institutions that are within the scope of the EBA's mandate, namely credit institutions and investment firms subject to the Capital Requirements Directive, as well as payment institutions and electronic money institutions. The investment firms within scope, provided that the new Investment Firm Regulation and Directive and related changes to CRD and the Capital Requirements Regulation have entered into force, will only be the largest investment firms (Class 1 Investment Firms). The Guidelines also integrate the recommendation on outsourcing to cloud service providers that was published by the EBA in December 2017. Both the 2006 guidelines and the December 2017 recommendations will be repealed when these new Guidelines enter into force.
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UK Financial Conduct Authority on Onshoring the EU Temporary Product Intervention Measures
02/22/2019
The U.K. Financial Conduct Authority has published a statement on onshoring of the European Securities and Markets Authority's temporary product intervention measures on retail contracts for difference and binary options products.
In June 2018, ESMA issued decision notices prohibiting the marketing, distribution or sale of binary options to retail clients and restricting the marketing, distribution or sale of CFDs to retail clients. These decisions have been renewed by ESMA and are currently due to expire on April 1, 2019 for binary options and April 30, 2019 for CFDs. Under the European Union (Withdrawal) Act 2018, the decisions will become part of U.K. domestic law on March 29, 2019, if the U.K. leaves the EU on that date without a ratified Withdrawal Agreement.
Read more. -
HM Treasury Publishes Guidance On Pension Scheme Arrangements and the EMIR Clearing Obligation In A No Deal Brexit Scenario
02/21/2019
HM Treasury has published guidance on the availability of the exemption from the clearing obligation for Pension Scheme Arrangements under the European Market Infrastructure Regulation in a post-Brexit no deal scenario. The U.K. government has been publishing statutory instruments (U.K. secondary legislation) onshoring and amending EU regulations for Brexit. This is being done under the European Union (Withdrawal) Act 2018, so as to ensure a workable U.K. statute book after Brexit. The U.K.'s onshoring legislation has been drafted so as to come into operation on exit day if there is a "no deal" scenario where the U.K. leaves the EU without a ratified withdrawal agreement. The onshoring legislation includes various statutory instruments to onshore the EU EMIR.
Read more. -
EU to Recognize Three UK CCPs in a No-Deal Brexit Scenario
02/18/2019
The European Securities and Markets Authority has announced that in the event of a no-deal Brexit, it will recognize three U.K.-established CCPs for the purposes of providing services in the EU, namely - LCH Limited, ICE Clear Europe Limited and LME Clear Limited. ESMA has adopted recognition decisions for each of the U.K. CCPs, which will take effect on the day after the U.K. leaves the EU. This follows the European Commission's earlier determination of U.K. equivalence for CCPs.
View ESMA's announcement. -
European Securities and Markets Authority Outlines Derivatives Reporting Obligations in the Event of a No-Deal Brexit
02/01/2019
The European Securities and Markets Authority has published a statement on the impact of a hard Brexit on the reporting obligation under the EU European Market Infrastructure Regulation. The statement considers the following counterparty scenarios: (i) EU27-EU27; (ii) EU27-U.K.; (iii) U.K.-EU27; and (iv) U.K.-U.K. The statement clarifies the position should the U.K. leave the EU without a deal and without a transition period, including reporting by CCPs and counterparties; reconciliation and recordkeeping by trade repositories, access by EU27 authorities to reported data and portability and aggregation by trade repositories. ESMA's statement clarifies that:- to continue to comply with their reporting obligation, EU27 counterparties and CCPs should report their derivatives to an EU-recognized or registered trade repository;
- U.K. counterparties are not expected to report to an EU trade repository on or after March 29, 2019, including derivatives rejected as of March 29, 2019 and amendments to derivatives concluded before March 29, 2019;
- EU27 counterparties and CCPs should consider any risks if they delegate their report submissions to a non-EU entity; and
- U.K. trade repositories should ensure the full transfer of all data to an EU27 trade repository before March 29, 2019.
View ESMA's statement. -
UK Financial Conduct Authority Consults on Proposed Changes to Handbook for Implementing the EU Prospectus Regulation
01/28/2019
The Financial Conduct Authority has published for consultation proposed changes to the Handbook. The changes are to align the Prospectus Rules sourcebook within the Handbook to ensure it is consistent with the new EU Prospectus Regulation that came into force on July 20, 2017.
The EU Prospectus Regulation sets out information that companies need to disclose to investors and potential investors in a prospectus when raising capital. Even though certain provisions of the EU Prospectus Regulation were anticipated to come into effect after the U.K.’s anticipated exit from the EU on March 29, 2019, the EU Prospectus Regulation will still be applicable during any Brexit transition or implementation period.
Read more. -
UK to Adopt EU Equivalence Decisions for Exchanges and Bank Exposures in No Deal Brexit
01/17/2019
HM Treasury has laid before Parliament a draft of the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019. The draft Regulations grant HM Treasury temporary powers to make equivalence determinations in relation to any EEA state for EU legislation that is being onshored. The retained EU law includes the Benchmark Regulation, the Capital Requirements Regulation, the European Market Infrastructure Regulation, the Markets in Financial Instruments Regulation, the Credit Rating Agencies Regulation, the Prospectus Directive, the Transparency Directive, the Securities Financing Transaction Regulation, the Short Selling Regulation and Solvency 2. The powers will enable HM Treasury to make equivalence decisions before Brexit that come into force on exit day in a no deal scenario. These powers are distinct from the powers granted to HM Treasury to make equivalence decisions post-Brexit under the specific sectoral onshored legislation and apply in parallel to relevant temporary permissions or registration regimes. The temporary powers would expire 12 months after exit day.
Read more.TOPIC : Brexit for Financial Services -
UK Draft Directions for EEA Funds and Fund Managers Wanting to Continue to Market in the UK Post-Brexit
01/07/2019
The U.K. Financial Conduct Authority has published two draft Directives relating to Brexit under the: (1) draft Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019; and (2) Alternative Investment Fund Managers Regulations 2013, as amended by the draft Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2019. These draft regulations will establish a Temporary Permissions Regime enabling EEA funds that currently market in the U.K. under an EEA passport to continue to do so for three years after the U.K. exits the EU.
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UK Regulator Consults on Technical Standards for Strong Customer Authentication in Payments as Preparation for a No-Deal Brexit
12/19/2018
The U.K. Financial Conduct Authority has launched a consultation on the proposed Technical Standards on strong customer authentication and common and secure open standards of communication (referred to as the U.K. SCA RTS). The U.K. SCA RTS would apply in the U.K. from September 14, 2019 in the event of a no-deal Brexit. The FCA's proposals will apply to payment service providers, including banks, building societies, e-money issuers, payment institutions, registered Account Information Services (AIS) and Payment Initiation Services (PIS) service providers. Responses to the consultation should be submitted by February 19, 2019. The FCA intends to publish the final Technical Standards in April 2019.
The EU SCA Regulatory Technical Standards (Commission Delegated Regulation (EU) 2018/389), which supplement the EU Payment Services Directive, came into force on March 14, 2018. The EU SCA RTS impose obligations on PSPs to increase the security of customers' payments made by card and other means and set out requirements on account servicing payment service providers (ASPSPs) relating to the third party providers of Account Information Services and Payment Initiation Services. The EU SCA RTS will apply directly across the EU from September 14, 2019.
The FCA is proposing to make the U.K. SCA RTS substantially similar to the EU SCA RTS so as not to disrupt and confuse the substantial preparations that industry has already made to implement the EU requirements. In the event of a no-deal Brexit, the U.K. SCA RTS will supplement the U.K. Payment Services Regulations 2017, as amended by the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018. Without the U.K. SCA RTS, the revised-for-Brexit PSRs would be ineffective as they require compliance with U.K.SCA RTS.
View the consultation paper (CP18/44). -
EU Temporary Equivalence Decisions for UK CCPs and CSDs
12/19/2018
The European Commission has adopted temporary equivalence decisions determining that the U.K. regulatory frameworks applicable to central counterparties and central securities depositories will be deemed equivalent to EU standards under the European Market Infrastructure Regulation and the Central Securities Depositories Regulation, respectively, in the event of a no-deal Brexit.
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European Commission Adopts Measures in Preparation for a No Deal Brexit
12/19/2018
The European Commission has published a Communication on Implementing the Commission's Contingency Action Plan for a no deal Brexit and has adopted all the legislative proposals and delegated acts announced in its November 2018 Contingency Plan. The actions relevant to the derivatives industry are the adoption by the Commission of:
- A temporary and conditional equivalence decision for CCPs already established and authorized in the U.K. CCPs established in third countries (which the U.K. will become on exit day) whose supervisory and legal regimes have been deemed to be equivalent to the EU regime may provide clearing services to clearing members or trading venues established in the EU. Such a CCP must be recognized by the European Securities and Markets Authority in accordance with the processes outlined in the European Market Infrastructure Regulation. The adopted decision would grant equivalence to the regulatory and legal regimes of the U.K. and Northern Ireland in relation to CCPs. The Commission's equivalence decision would apply for 12 months from exit day. ESMA remains to designate various U.K. CCPs.
Read more. -
UK Conduct Regulator Publishes Directions For E-Money and Payment Services Temporary Permissions Regime
12/18/2018
The U.K. Financial Conduct Authority has published two Directions under the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018, specifying how and when firms subject to the Regulations should make Temporary Permissions Notifications. The Regulations set out how firms that are entitled to provide e-money or payment services immediately before the U.K.’s exit from the EU may continue to provide those services for a specified period after exit day. Firms must notify the FCA of their desire to make use of this temporary permission regime in accordance with the FCA’s Directions.
View the FCA's Direction on notifications for e-money institutions under the Regulations.
View the FCA's Direction on Notifications for payment services institutions under the Regulations.
View details of the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018. -
Brexit: European Banking Authority Calls for More Communication with Clients
12/17/2018
The European Banking Authority has published a press release calling for firms to take more action in their Brexit-related communications with customers. The U.K. will depart the EU without a transitional period on March 30, 2019 if the withdrawal agreement is not ratified by that time. In June 2018, the EBA issued an Opinion that stressed the need for firms to consider their obligations to existing and prospective customers. It set out a list of minimum information that national regulators should ensure firms send to customers whose contracts or services might be affected by the end of the year. In its press release, the EBA urges firms to consider the June 2018 Opinion and to communicate to customers the risks and effects that a no-deal Brexit may have on a customer's contract with the firm.
View the press release.
View details of the EBA's June 2018 Opinion. -
EU Court Rules That the UK Can Unilaterally Revoke its Brexit Notice
12/10/2018
The Court of Justice of the European Union has ruled that the U.K. is able to unilaterally revoke its notice of intention to withdraw from the EU. Any such revocation could only be made before the draft Withdrawal Agreement entered into force or, if there is no agreement, expiration of the two-year period since the withdrawal notification was made or any extension of that two-year period in accordance with Article 50 of the Treaty on the European Union. The revocation could also only be made after a revocation decision was made by the U.K. according to its constitutional requirements.
The CJEU decision means that the U.K. Parliament has three options to consider on Brexit: remain in the EU, accept the draft withdrawal agreement negotiated by the U.K. Government or leave the EU on March 29, 2019, without an agreement (known as a "hard Brexit").
Read more.TOPIC : Brexit for Financial Services -
​Further UK Legislation in Preparation for Brexit Comes Into Force
12/06/2018
Three pieces of U.K. legislation to onshore EU laws in preparation for Brexit have been made. These are:
- The Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1318).
A number of technical changes have been made as a result of the consultation process, but these do not affect the fundamental intention and scope of the legislation. The Regulations come into force on December 7, 2018, except for the provisions amending the European Market Infrastructure Regulation, which will come in force on exit day. Advance applications for registration of a trade repository must be submitted to the Financial Conduct Authority between December 7, 2018 and immediately before exit day, instead of on exit day.
These Regulations establish: (i) a temporary registration regime to enable U.K. and EU trade repositories to benefit - on complying with certain requirements - from temporary registration while the FCA considers their application; and (ii) a conversion regime that will allow U.K. trade repositories that are currently registered with the European Securities and Markets Authority to be registered as authorized U.K. trade repositories by the FCA from exit day.
Read more. -
UK Draft Regulations on Credit Ratings in Preparation for Brexit
11/30/2018
HM Treasury has laid before Parliament the draft Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019 to onshore the EU Credit Rating Agencies Regulation for Brexit. This follows the publication of related explanatory information on October 8, 2018.
The EU CRA Regulation regulates CRAs established in the EU. The European Securities and Markets Authority directly supervises EU CRAs registered with it under the CRA Regulation. The CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may only use credit ratings for certain regulatory purposes if a rating is issued by: (i) an EU CRA registered with ESMA; (ii) a third-country CRA under the endorsement regime; or (iii) a third-country CRA under the equivalence/certification regime. Endorsement allows credit ratings issued by a third-country CRA to be used for regulatory purposes in the EU, provided that the rating has been endorsed by an EU CRA. The equivalence/certification regime allows credit ratings issued by a third-country CRA in relation to a third-country entity or financial instrument to be used in the EU for regulatory purposes. It does not cover ratings issued by a third-country CRA for an EU entity or a financial instrument issued in the EU.
Read more. -
Draft UK Legislation to Onshore the EU Reorganization and Winding Up Directives Published in Preparation for Brexit
11/30/2018
HM Treasury has published a draft statutory instrument to onshore further EU financial services legislation in preparation for Brexit - the draft Credit Institutions and Insurance Undertakings Reorganization and Winding Up (Amendment) (EU Exit) Regulations 2018. An explanatory memorandum has also been published. HM Treasury has prepared the draft SI using powers granted to it under the EU Withdrawal Act 2018 to address failures of retained EU law to operate effectively or other deficiencies arising from the U.K. leaving the EU.
The draft SI will onshore the EU Credit Institutions (Reorganisation and Winding Up) Directive and certain aspects of Solvency II. These Directives establish EEA frameworks for the reorganization and winding up of EEA banks, building societies, credit unions and insurers. They were transposed into U.K. law in the Insurers (Reorganization and Winding Up) Regulations 2004 (S.I. 2004/353), the Credit Institutions (Reorganization and Winding Up) Regulations 2004 (S.I. 2004/1045), and the Insurers (Reorganization and Winding Up) (Lloyd's) Regulations 2005 (S.I. 2005/1998).
Read more. -
UK Draft Regulations Governing Financial Market Infrastructure in Preparation for Brexit
11/30/2018
HM Treasury has published a new draft statutory instrument, the draft Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2018. The draft instrument is part of its work to ensure that the U.K.'s financial services laws are operative on exit day. The related explanatory information was published on November 22, 2018. The draft Regulations amend relevant parts of the Financial Services and Markets Act 2000 and the Recognition Requirements for Investment Exchanges, Clearing Houses and Central Securities Depositories Regulations 2001/995.
Read more. -
Proposed Exemption From EU Margin Obligations for OTC Derivatives Novated to EU Counterparties in Preparation for a "No Deal" Brexit
11/29/2018
The Joint Committee of the European Supervisory Authorities has published a final report and final draft Regulatory Technical Standards to amend the existing RTS on margin requirements for uncleared OTC derivative contracts. The ESAs are proposing the introduction of a 12-month exemption from the margin exchange obligations to facilitate the novation of uncleared OTC derivative contracts to EU counterparties in the event of a "no deal" Brexit. The European Market Infrastructure Regulation requires counterparties to uncleared OTC derivative transactions to implement risk mitigation techniques to reduce counterparty credit risk. The RTS prescribe required margin amounts to be posted and collected and the methodologies by which the minimum amount of initial margin and variation margin should be calculated, as well as listing securities eligible as collateral, such as sovereign bonds, covered bonds, some securitization instruments, corporate bonds, gold and some equities. The variation margin requirements have applied to all counterparties since March 1, 2017.
Read more. -
UK Payment Systems Regulator Consults on Brexit-Related Changes to Onshore Regulatory Technical Standards Under the Interchange Fees Regulation
11/29/2018
The U.K. Payment Systems Regulator has launched a consultation on its proposals to onshore the Regulatory Technical Standards supplementing the EU Interchange Fee Regulation to ensure the RTS can still operate effectively once the U.K. has left the EU. The consultation will primarily be relevant for card schemes subject to the IFR, parties contracting with card schemes and/or processing entities (e.g. issuers, acquirers) and third-party card payment processors.
The PSR is empowered by HM Treasury, under the Financial Regulators’ Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018, to correct deficiencies in the RTS and to maintain them after exit day. The RTS set out detailed requirements for payment card schemes and processing entities, to ensure there is the requisite level of independence in accounting, organization and decision-making processes. The PSR proposes to amend the RTS in line with the draft Interchange Fee (Amendment) (EU Exit) Regulations 2018, published by HM Treasury on November 16, 2018 to onshore the IFR. The PSR's consultation paper includes a draft of the Technical Standards (Interchange Fee Regulation) (EU Exit) instrument 2019.
Comments on the consultation are invited by December 17, 2018. The PSR intends that the finalized version of the EU Exit instrument will take effect on exit day in the event of a no deal scenario.
View the consultation paper (PSR CP 18/3).
View details of the draft Interchange Fee (Amendment) (EU Exit) Regulations 2018.
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UK Treasury Policy on "In Flight" EU Legislation in Preparation for a "No Deal" Brexit
11/28/2018
Following the introduction to Parliament on November 22, 2018 of the Financial Services (Implementation of Legislation) Bill, HM Treasury has published a Policy Note on the Bill. The Bill gives HM Treasury, in a Brexit no deal scenario, powers to implement and make amendments to a specified list of "in flight" financial services legislation. The Bill covers EU financial services legislation which is proposed or published but that is out of scope of the European Union (Withdrawal) Act 2018 because it will not be operative on or before exit day. Only legislation with an implementation date falling in the two years after exit is covered. The Bill sets out a list of the legislation that is covered, namely:- the settlement discipline regime under the Central Securities Depositories Regulation (Articles 6 and 7);
- the Delegated Cash Penalties Regulation;
TOPIC : Brexit for Financial Services -
UK Conduct Regulator Publishes Second Consultation on Brexit-Related Changes to Its Rulebook and Binding Technical Standards
11/26/2018
The U.K. Financial Conduct Authority has published a second consultation on proposed changes to the FCA Handbook and guidance to ensure a functioning legal and regulatory framework for financial services in the event of a "no-deal" scenario whereby the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement in place and there is consequently no transitional period for firms. The proposed amendments will not take effect on exit day if the U.K. enters into a transitional period.
The consultation includes the FCA's further proposals in relation to those Binding Technical Standards that it has been empowered by HM Treasury to amend prior to Brexit and to maintain afterwards. Since the FCA's first consultation on Brexit-related Handbook changes in October 2018, HM Treasury has published further policy notes and/or financial services "onshoring" statutory instruments with proposed amendments to retained EU law. Many of the FCA's proposals on the BTS are consequential in nature and follow the amendments proposed in the statutory instruments.
Read more. -
European Supervisory Authority Public Statement on Post-Brexit Temporary Recognition for UK CCPs if No UK-EU Deal
11/23/2018
The European Securities and Markets Authority has issued a public statement entitled "Managing risks of a no-deal Brexit in the area of central clearing." In the statement, ESMA confirms that its Board of Supervisors supports continued access to U.K. CCPs by EU market participants, to limit the risk of disruption in central clearing and to avoid negatively impacting EU financial market stability following the U.K.'s exit from the EU. This would appear likely to take effect pursuant to a temporary or interim equivalence and/or Qualifying CCP determination under European Market Infrastructure Regulation and the Capital Requirements Directive in respect of the U.K. and its CCPs, effective on Brexit.
Read more. -
UK Draft Legislation to Onshore EU Packaged Retail and Insurance-Based Investment Products for Brexit
11/22/2018
HM Treasury has published a draft version of the Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Regulations 2019. The EU PRIIPS Regulation requires a standardized disclosure document (called a Key Information Document or KID) to be provided when packaged investment or insurance-based investment products are sold to retail investors.
The draft Regulations correct deficiencies in the U.K. Packaged Retail and Insurance-based Investment Products Regulations 2017 and in the directly applicable EU PRIIPS Regulation (and its secondary legislation) to be retained on Brexit. The draft Regulations will primarily be relevant for firms that manufacture, sell or advise on retail investment products that fall within the scope of the PRIIPs Regulation. This includes, but is not limited to, asset managers, insurers and investment advisors.
Read more. -
UK Sanctions and Anti-Money Laundering Act 2018 Sanctions Provisions Brought Into Force
11/21/2018
The Sanctions and Anti-Money Laundering Act 2018 (Commencement No.1) Regulations 2018 were made on November 21, 2018, bringing into force the majority of the sanctions provisions of the Act with effect from November 22, 2018.
The Act's provisions empower the U.K. Government to make sanctions regulations to be imposed, where appropriate, to comply with United Nations obligations or other international obligations, to further the prevention of terrorism, for the purposes of national security or international peace and security, or to further foreign policy objectives. The Act also empowers the U.K. Government to create, amend and update regulations for the detection, investigation and prevention of money laundering and terrorist financing and for the purposes of implementing standards published by the Financial Action Task Force relating to combating threats to the integrity of the international financial system.
The Act received Royal Assent and came partly into force on May 23, 2018. Provisions in force from November 22, 2018 are:- sections 1 to 31;
- sections 33 to 48;
- sections 57 and 58;
- section 59(4) (to the extent that it relates to Schedule 3, paragraphs 1 to 7 and sub-paragraphs 8(1) to 8(3)); and
- Schedule 1.
The remaining Provisions of the Act that will be brought into force at a later date include the provisions related to anti-money laundering.
View the Commencement Regulations (SI 2018/1213).
View the Sanctions and Anti-Money Laundering Act 2018. -
UK Government Publishes Guidance on Proposals to Onshore Primary Markets Legislation for Brexit
11/21/2018
HM Treasury has published explanatory guidance on a draft statutory instrument, the Official Listing of Securities, Prospectus and Transparency (Amendment) (EU Exit) Regulations 2019. The statutory instrument is still under development and a draft will be published in due course. The draft Regulations will amend Brexit-related onshoring deficiencies in the U.K. legislation that implemented the EU Prospectus Directive, the Transparency Directive and the Consolidated Admissions and Reporting Directive, which together make up the EU legal framework for primary markets. No deficiencies have been identified for the CARD.
Read more. -
UK Government Publishes Guidance on Proposals to Onshore EU Market Abuse Regulation for Brexit
11/21/2018
HM Treasury has published explanatory information on a draft statutory instrument, the Market Abuse (Amendment) (EU Exit) Regulations 2018. The statutory instrument is still under development and a draft will be published in due course. The draft Regulations will affect the Financial Conduct Authority and all natural and legal persons which issue or trade in financial instruments admitted to trading or traded on an U.K. or an EU trading venue, including legal firms, professional service firms and any legal person that obtains access to the inside information of an issuer.
Read more. -
UK Government Refused Challenge of Ability of Court of Justice of the European Union to Rule on Whether Brexit Notification Can Be Revoked
11/20/2018
The U.K. Supreme Court has announced that it has refused the permission to appeal application of the Secretary of State for Exiting the European Union. The application had been made to stop the reference by the Inner House of the Court of Session in Scotland to the European Court of Justice for a preliminary ruling on whether the U.K. can unilaterally revoke its notice of withdrawal from the EU. The court's referral to the CJEU was discussed in our previous post. The Court of Session opined on September 21, 2018 that a reference should be made to the CJEU - Wightman v Secretary of State for Exiting the European Union [2018] CSIH 62.
The U.K. Department for Exiting the EU has also published a statement on the reference to the CJEU confirming that it has submitted written observations to the CJEU. The Government's position is that the reference to the CJEU is inadmissible on the basis that the CJEU does not answer hypothetical questions or provide advisory opinions.
An oral hearing before the CJEU is scheduled for November 27, 2018.
View the Supreme Court's announcement.
View the DxEU statement.
View details of the Court of Session Opinion.TOPIC : Brexit for Financial Services -
UK Legislation Made for Onshoring the EU SEPA Regulation
11/19/2018
The Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018 were made on November 19, 2018 and will enter into force on the day the U.K. exits the EU. The Regulations are relevant for all Payment Service Providers – banks, payment institutions, e-money institutions and registered Account Information Service Providers.
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UK Legislation Published to Onshore the European Long-Term Investment Funds Regulation For Brexit
11/19/2018
HM Treasury has published a draft version of the Long-term Investment Funds (Amendment) (EU Exit) Regulations 2018. The draft Regulations correct deficiencies in the directly applicable European Long-term Investment Funds Regulation to be retained on Brexit, which governs funds that invest into infrastructure and other long-term projects. The draft Regulations will primarily affect fund managers operating ELTIFs registered in the UK.
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Draft UK Legislation Published to Onshore the EU Interchange Fee Regulation for Brexit
11/16/2018
HM Treasury has published a draft version of the Interchange Fee (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations will primarily affect payment system operators, payment service providers (including banks and building societies) and the businesses and individuals who rely on card payment systems. The Payment Systems Regulator will consult separately on consequential changes to its guidance on the IFR once the draft Regulations are made. The PSR will also be responsible for correcting deficiencies in the Binding Technical Standards made under the IFR.
The draft Regulations amend the EU Interchange Fee Regulation that will be retained on Brexit and the Payment Card Interchange Fee Regulations 2015. The changes are designed to ensure that current laws on interchange fees continues to operate effectively in the U.K. once the U.K. has left the EU.
Read more. -
EU Legislation Published for Relocation of the European Banking Authority Post-Brexit
11/16/2018
A Regulation amending the founding Regulation of the European Banking Authority has been published in the Official Journal of the European Union. The Amending Regulation amends the EBA Regulation to change the seat of the EBA from London to Paris.
The Amending Regulation enters into force on November 16, 2018 and will take effect on March 30, 2019.
View the Amending Regulation (EU) 2018/1717.TOPIC : Brexit for Financial Services -
Draft EU-UK Withdrawal Agreement Published
11/14/2018
The European Commission and the U.K. government published a draft Withdrawal Agreement and an Outline Political Declaration on the framework for the future relationship between the EU and the U.K. The draft Withdrawal Agreement has been agreed between the negotiators and must still be ratified by the U.K. and EU27 leaders. The full Political Declaration on the future relationship is expected by the end of November 2018, provided the draft Withdrawal Agreement is ratified.
The draft Withdrawal Agreement outlines how the U.K. will leave the EU and provides for the previously agreed transition period that would run from March 30, 2019 until December 31, 2020. It also provides for the agreements concerning the future relationship to be negotiated expeditiously with the objective of ensuring that the agreements apply from the end of the transition period. This timeframe is reiterated in the Outline Political Declaration. The negotiators have committed to report regularly on progress made on concluding the agreements governing the future relationship between the EU and the U.K.
The Outline Political Declaration briefly sets out the principles agreed by the negotiators for the future relationship. The Outline confirms that the basis of the future relationship in financial services will be decision-making autonomy and equivalence. The EU and the U.K. are to strive to conclude equivalence assessments before the end of June 2020. The documentation is silent on whether there will be any changes to the processes around equivalency or any expansion to the categories of equivalences under U.K. or EU laws.
Read more.TOPIC : Brexit for Financial Services -
European Commission Publishes Aspects of Contingency Plans For No Deal Brexit
11/13/2018
The European Commission has published a Communication establishing certain contingency action plans in preparation for a "no deal" Brexit. The Communication sets out certain actions that the EU is or is proposing to take in the event of a "hard" Brexit. In relation to financial services, the Commission states that it will adopt temporary and conditional equivalence decisions to avoid disruption to derivatives clearing and depositaries services. The decisions would "complement" recognition of U.K. financial market infrastructures. The Commission has also urged these entities to apply in advance for recognition from the European Securities and Markets Authority.
The Commission reiterates that uncleared OTC derivatives contracts should remain valid and executable until maturity although, where one counterparty is based in the U.K., certain life-cycle events may trigger the need for an authorization or exemption.
In the Communication, the European Commission further notes that the risks presented to financial services by a "no deal" Brexit have decreased significantly over time because of the action taken by firms to establish new entities or relocate entities and to transfer contracts. In particular, the Commission observes that insurance firms have taken steps to ensure that they can continue to provide services to their clients, including transferring contracts, setting up branches or subsidiaries and merging with firms established in the EU27.
The Commission also encourages the European Supervisory Authorities to begin preparing cooperation arrangements with the U.K. financial regulators to provide for the exchange of information and supervisory cooperation.
View the Communication. -
UK Legislation Published to Onshore Anti-Money Laundering and Counter-Terrorism Financing Legislation for Brexit
11/13/2018
HM Treasury has published a draft of the Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations will primarily be relevant for payment service providers, anti-money laundering/counter-terrorism financing supervisory authorities and firms that are regulated through the U.K.'s AML/CTF regime. The draft Regulations introduce no material policy changes. Their purpose is to correct deficiencies in U.K. law and retained EU law to ensure that the U.K. AML/CTF regime continues to function effectively after the U.K.'s withdrawal from the EU.
The draft Regulations amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs), which transposed into U.K. law the provisions of the EU Fourth Money Laundering Directive (4MLD). The draft Regulations also amend the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations 2017 and the revised EU Funds Transfer Regulation (Regulation (EU) 2015/847). This EU Regulation gives legal effect to Financial Action Task Force Recommendation 16, on the information accompanying electronic transfers of funds. Additionally, the draft Regulations revoke Commission Delegated Regulation (EU) 2018/1108, which sets out Regulatory Technical Standards for central contact points under 4MLD.
Read more. -
Statement by EU Supervisory Authority Confirms No EU Transitional Measures For UK Credit Rating Agencies and Trade Repositories on a Hard Brexit
11/09/2018
The European Securities and Markets Authority has issued a public statement urging customers of credit rating agencies and trade repositories to prepare for a "no deal" Brexit. The European Market Infrastructure Regulation requires derivatives subject to the reporting obligation to be reported to either a registered trade repository established in the EU or a recognized third-country trade repository. The CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may only use credit ratings for certain regulatory purposes if a rating is issued by: (i) an EU CRA registered with ESMA; or (ii) a third-country CRA under the endorsement regime or the equivalence/certification regime. Without the EU putting in place a temporary regime (as the U.K. is doing), U.K. CRAs and trade repositories will lose their EU registration when the U.K. leaves the EU on a "hard Brexit." ESMA reiterates that all market participants must ensure that they continue to comply with their obligations under EMIR, the CRA Regulation and other EU legislation and should monitor the Brexit-related public statements issued by CRAs and trade repositories.
Read more.TOPIC : Brexit for Financial Services -
UK Financial Conduct Authority Issues Direction For Post-Brexit Temporary Permissions Regime
11/09/2018
The U.K. Financial Conduct Authority has issued a Direction detailing how an EEA firm currently passporting into the U.K. should notify it of the firm's intention to benefit from the Temporary Permissions Regime in the event of a "no deal" Brexit. The Direction was made under the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 (made on November 6, 2018). The Regulations provide for a Temporary Permissions Regime for firms that are currently authorized to carry on a regulated activity in the U.K. under an EEA passporting right that have either applied for U.K. authorization prior to the U.K. withdrawal date or have notified the relevant U.K. regulator of their intention to continue carrying on passported activities. Temporary permissions would deem firms within the regime as authorized for their current activities for a maximum of three years, subject to a power for HM Treasury to extend the regime's duration by increments of 12 months.
As with the PRA's Direction (issued on November 7, 2018), the FCA requires firms to submit the Temporary Permission Notification Form using Connect between January 7, 2019 and March 28, 2019.
View the FCA's Direction.
View details of the PRA's Direction.TOPIC : Brexit for Financial Services -
Proposed Exemption From the EU Clearing Obligation for OTC Derivatives Novated to EU Counterparties in Preparation For a "No Deal" Brexit
11/08/2018
The European Securities and Markets Authority has proposed the introduction of a 12-month exemption from the clearing obligation to facilitate the novation of uncleared OTC derivative contracts to EU counterparties in the event of a "no deal" Brexit. The European Market Infrastructure Regulation imposes a clearing obligation on EU firms that are counterparties to certain OTC derivatives contracts. The clearing obligation applies to Interest Rate Swaps denominated in seven currencies (EUR, GBP, JPY, USD, NOK, PLN and SEK) and to two classes of credit default swap indices (iTraxx Europe Main and iTraxx Europe Crossover). The obligation to clear OTC IRS denominated in all seven currencies is in force for clearing members of EU CCPs as well as large financial counterparties and alternative investment funds. The IRS clearing obligation will apply to small financial counterparties and AIFs from June 21, 2019 and to non-financial counterparties from December 21, 2018 for IRS denominated in the G4 currencies, and from August 9, 2019 for IRS denominated in CZK, DKK, HUF, NOK, SEK and PLN. The CDS clearing obligation is in force for clearing members of EU CCPs, large financial counterparties and AIFs. It applies to non-financial counterparties from May 9, 2019 and to small financial counterparties and AIFs from June 21, 2019.
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UK Legislation Published for Brexit on Bank of England's Functions
11/07/2018
HM Treasury has laid before Parliament the draft Bank of England (Amendment) (EU Exit) Regulations 2018, together with a draft explanatory memorandum.
The draft Regulations make amendments to the Bank of England Act 1998, the Financial Services Act 2012 and related secondary legislation to ensure that the constitution, responsibilities and functions of the Bank of England continue to be clearly defined after exit day, including in a "no-deal" scenario. In the explanatory memorandum accompanying the draft Regulations, HM Treasury confirms that the draft Regulations make only technical changes to existing legislation to ensure that it continues to operate effectively once the U.K. leaves the EU. This includes amendments to information sharing and notification requirements and amendments to certain definitions so that they work in the U.K. after exit day. Amendments to secondary legislation include necessary adjustments to provisions on capital buffers and amounts of cash ratio deposits that certain financial services firms must hold with the BoE.
Read more.TOPIC : Brexit for Financial Services -
UK Prudential Regulation Authority Issues Direction for Temporary Permissions Regime
11/07/2018
The Prudential Regulation Authority has issued a Direction setting out how an EEA firm currently passporting into the U.K. should notify the PRA if the firm wants to benefit from the Temporary Permissions Regime in the event of a "no deal" Brexit. The Direction was made under the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 (made on November 6, 2018). The Regulations provide for a Temporary Permissions Regime for firms that are currently authorized to carry on a regulated activity in the U.K. under an EEA passporting right that have either applied for U.K. authorization prior to the U.K. withdrawal date or have notified the relevant U.K. regulator of their intention to continue carrying on passported activities. Temporary permission would deem firms within the regime as authorized for their current activities for a maximum of three years, subject to a power for HM Treasury to extend the regime's duration by increments of 12 months.
The PRA Direction requires firms to submit the Temporary Permission Notification Form using Connect between January 7, 2019 and March 28, 2019.
View the PRA's Direction.
View the EEA Passport Rights Regulations 2018.TOPIC : Brexit for Financial Services -
Bank of England Provides Further Guidance on Settlement Finality Designation Post-Brexit
11/06/2018
The Bank of England has published the "Dear CEO" letter that it has sent to the Chief Executive Officers of EU CCPs, central securities depositaries and payment systems that are currently designated under the EU Settlement Finality Directive. The designation of these systems is automatically recognized in the U.K. under the SFD framework for automatic recognition, but the U.K. will fall outside the EU framework upon Brexit.
The "Dear CEO" letter follows an earlier letter issued by the BoE in July 2018 and the publication, by HM Treasury, of a draft of the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2018 on October 31, 2018. The draft Regulations will, once in force, empower the BoE to grant permanent designation to non-U.K. (including EU) systems that are not governed by U.K. law. They also establish a temporary designation regime for EU systems that are currently designated under the SFD.
In the letter, the BoE sets out further details of the permanent designation of non-U.K. systems post-Brexit. It also sets out how EU systems can go about applying to enter the temporary designation regime in a "no deal" scenario (where the U.K. exits the EU without a ratified Withdrawal Agreement) in order to continue to benefit from U.K. SFD protection until the permanent designation process is complete.
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Brexit Legislation Published Establishing a Temporary Permissions Regime for EEA Firms Passporting into the UK
11/06/2018
The EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 were made on November 6, 2018. The Regulations provide, among other things, for a Temporary Permissions Regime for firms that are currently authorized to carry on a regulated activity in the U.K. under an EEA passporting right that have either applied for U.K. authorization prior to the U.K. withdrawal date or have notified the relevant U.K. regulator of their intention to continue carrying on passported activities. The Regulations come into force on November 7, 2018 except for the following provisions, which come into force on exit day:- Regulation 2 (Repeal of passport rights, etc);
- Regulation 3 (Consequential amendments);
- Regulation 4 (Saving provision: tax); and
- Regulation 24 (Financial Services Compensation Scheme - modifications of Part 15 of the Financial Services and Markets Act 2000).
View the EEA Passport Rights Regulations 2018.
View details of the draft regulations.TOPIC : Brexit for Financial Services -
UK Legislation Published to Preserve Settlement Finality Designation Post-Brexit
10/31/2018
HM Treasury has published a draft of the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2018. These draft Regulations introduce changes across various pieces of legislation relevant to financial market infrastructure to implement Brexit, namely the Settlement Finality Regulations, the Companies Act 1989, the Financial Collateral Arrangements (No.2) Regulations and the Banking Act 2009, so that U.K. domestic law concerning financial market infrastructure insolvency can continue to operate effectively after the U.K. leaves the EU.
The draft Regulations are designed to maintain legal certainty for EU systems that conduct business with U.K. participants, by providing for the continuation of U.K. settlement finality protections currently provided under the Settlement Finality Directive.
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UK Post-Brexit Legislation Published to Onshore the EU Payment Accounts Directive for Brexit
10/31/2018
HM Treasury has published a draft of the Payment Accounts (Amendment) (EU Exit) Regulations 2018, along with explanatory information.
The draft Regulations will amend the U.K. Payment Accounts Regulations 2015, which implemented the EU Payment Accounts Directive in the U.K., to remove references to EU institutions and to remove requirements which were intended to improve the functioning of the EU's internal market.
The draft Regulations will affect all Payments Service Providers that offer payment accounts, and, in particular, the U.K.'s nine designated providers of basic bank accounts. Consumers of payment accounts will also be affected, in particular those who hold basic bank accounts. HM Treasury states that it expects the changes for payment account providers and consumers to be minimal.
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UK Legislation Published to Onshore the EU Venture Capital Funds and Social Entrepreneurship Funds Regulations for Brexit
10/31/2018
HM Treasury has published the draft Venture Capital Funds (Amendment) (EU Exit) Regulations 2018 and the draft Social Entrepreneurship Funds (Amendment) (EU Exit) Regulations 2018, along with explanatory information. HM Treasury is also preparing draft Long-term Investment Funds (Amendment) (EU Exit) Regulations 2018 and will publish these in due course.
These draft "onshoring" statutory instruments will amend deficiencies in the retained versions of the following directly applicable EU Regulations:- the European Venture Capital Funds (EuVECA) Regulation, which governs funds that invest into small and medium-sized enterprises;
- the European Social Entrepreneurship Funds (EuSEF) Regulation, which governs funds that invest into social investments; and
- the European Long-term Investment Funds (ELTIF) Regulation, which governs funds that invest into infrastructure and other long-term projects.
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UK Legislation in Force Empowering Regulators to Amend EU Binding Technical Standards For Brexit
10/26/2018
The Financial Regulators' Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 were made on October 25, 2018 and entered into force on October 26, 2018.
The Regulations delegate power under the EU (Withdrawal) Act 2018 to the Bank of England, the Prudential Regulation Authority, the Financial Conduct Authority and the Payment Systems Regulator to fix deficiencies in EU Binding Technical Standards and regulators’ rules in advance of exit day, so that the BTS and regulators' rules function effectively after Brexit. The Regulations also establish the statutory basis on which those regulators will continue to maintain the relevant BTS after exit. The Schedule to the Regulations lists all the BTS that will be "onshored" and, for each, allocates joint or individual responsibility among the regulators.
The version of the Regulations that has entered into force contains only minor changes from the draft version that was published in July 2018.
View the Regulations (S.I. 2018/1115).
View the explanatory memorandum.TOPIC : Brexit for Financial Services -
Bank of England and UK Prudential Regulator Consult on Approach to Onshoring EU Financial Services Legislation for Brexit
10/25/2018
The Bank of England and the U.K. Prudential Regulation Authority have launched a joint consultation paper entitled "The Bank of England’s approach to amending financial services legislation under the European Union (Withdrawal) Act 2018." The consultation forms part of a package of consultations, "Dear CEO" letters and other communications published by the BoE and the PRA on October 25, 2018.
Read more.TOPIC : Brexit for Financial Services -
"Dear CEO" Letter From UK Prudential Regulator Updates PRA-Regulated Firms on Brexit
10/25/2018
The U.K. Prudential Regulation Authority has published a "Dear CEO" letter that it has sent to the Chief Executive Officers of all firms authorized and regulated by the PRA, as well as EEA firms undertaking cross-border activities into the U.K. from the rest of the European Union by means of a single market passport.
The letter refers to the publication, on October 25, 2018, of a package of consultations and other communications by the Bank of England that provide more detail on the planned Brexit-related changes to PRA rules and to the onshored Binding Technical Standards within the remit of the PRA and the BOE in their various capacities. The letter builds on the communications released by the government and U.K. regulators in June 2018 on their overall approach to onshoring financial services legislation under the EU (Withdrawal) Act 2018.
Read more.TOPIC : Brexit for Financial Services -
Bank of England Updates Non-UK CCPs on Approach to Recognition Post-Brexit
10/25/2018
The Bank of England has published a "Dear CEO" letter sent by Sir John Cunliffe, Deputy Governor, Financial Stability, to the Chief Executive Officers of non-U.K. CCPs to provide more detail on the post-Brexit recognition of non-U.K. CCPs and the temporary permissions regime that will give temporary deemed recognized status to eligible non-U.K. CCPs.
The BoE wrote to the CEOs of non-U.K. CCPs in December 2017, outlining that forthcoming U.K. legislation would give it a new power to recognize non-U.K. CCPs and that it anticipated that, in the period immediately after Brexit, the recognition regime for non-U.K. CCPs would be materially the same as the third country recognition regime under the European Market Infrastructure Regulation, but might be reviewed later. In an update in March 2018, the BoE confirmed that non-U.K. CCPs already providing services in the U.K. should be able to continue to do so until the end of the envisaged transitional, or "implementation" period after Brexit.
This latest letter to non-U.K. CCPs provides an update following the laying before Parliament, in July 2018, of the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 before Parliament in July 2018. Subject to Parliamentary scrutiny, these Regulations are expected to enter into force during Q4 2018, establishing the post-Brexit framework for non-U.K. CCP recognition. The letter outlines actions non-U.K. CCPs will need to take once the Regulations are in force.
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Bank of England Updates Non-UK CSDs on Approach to Recognition Post-Brexit
10/25/2018
The Bank of England has published a "Dear CEO" letter sent by Sir John Cunliffe, Deputy Governor, Financial Stability, to the Chief Executive Officers of non-U.K. Central Securities Depositories that have been identified as possibly requiring recognition to provide CSD services in the U.K. after Brexit. The Dear CEO letter provides more detail on the post-Brexit recognition of non-U.K. CSDs by the BoE and on the transitional regime that has been set out in the draft Central Securities Depositories (Amendment) (EU Exit) Regulations 2018.
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Bank of England Consults on Changes to FMI Rules and Onshored Binding Technical Standards for Brexit
10/25/2018
The Bank of England has published a consultation paper entitled "UK withdrawal from the EU: Changes to FMI rules and onshored Binding Technical Standards." The consultation forms part of a package of consultations, "Dear CEO" letters and other communications published by the BoE and the PRA on October 25, 2018.
The consultation proposals cover:- the BoE's proposed fixes to deficiencies in the onshored Binding Technical Standards for which the BoE, as FMI supervisor, has responsibility under the Financial Regulators’ Powers, (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018;
- the BoE's proposals to amend its FMI rules; and
- the BoE's proposed approach to non-binding BoE materials after Brexit.
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Bank of England Launches Consultation Package on EU Withdrawal
10/25/2018
The Bank of England has issued a press release providing an update on its regulatory and supervisory approach to Brexit. The press release refers to a package of communications and new consultations published by the BoE on October 25, 2018. Building on previous communications with firms, this package of communications includes four consultation papers:
- A joint consultation on the BoE/Prudential Regulation Authority's general approach to making changes to PRA rules and to Binding Technical Standards to implement Brexit. This consultation is to be read in conjunction with the other three consultations.
- A PRA consultation on proposed changes to PRA rules and to the onshored BTS within the PRA's remit.
- A BoE consultation on changes to Financial Market Infrastructure rules and onshored BTS within the BoE's remit as FMI supervisor, along with a draft Supervisory Statement on the BoE's expectations of FMIs in relation to existing non-binding domestic material.
- A BoE consultation on the onshored BTS within the BoE's remit as the U.K. resolution authority.
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Bank of England Consults on Approach to Resolution Statements of Policy and Onshored Binding Technical Standards for Brexit
10/25/2018
The Bank of England has published a consultation paper entitled "UK withdrawal from the EU: The Bank of England’s approach to resolution statements of policy and onshored Binding Technical Standards." The consultation forms part of a package of consultations, "Dear CEO" letters and other communications published by the BoE and the Prudential Regulation Authority on October 25, 2018.
The consultation covers:- the BoE’s proposals to fix deficiencies in the onshored Binding Technical Standards under the Bank Recovery and Resolution Directive, for which it is responsible in its capacity as U.K. resolution authority. The PRA has consulted separately on proposals for the BRRD BTS that are within its remit; and
- the BoE's proposed guidance on how the existing Statements of Policy on resolution should be interpreted after Brexit. These SoPs cover the BoE's: (i) power to direct institutions to address impediments to resolvability; (ii) approach to setting a minimum requirement for own funds and eligible liabilities (MREL) within groups, and further issues; and (iii) policy on valuation capabilities to support resolvability. li >
The proposals are relevant to all firms that are subject to the BoE's resolution powers, such as banks, larger investment firms and CCPs.
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UK Prudential Regulator Consults on Rule Changes and Onshoring of Binding Technical Standards for Brexit
10/25/2018
The U.K. Prudential Regulation Authority has published a consultation paper entitled "UK withdrawal from the EU: Changes to PRA Rulebook and onshored Binding Technical Standards." The consultation forms part of a package of consultations, "Dear CEO" letters and other communications published by the BoE and the PRA on October 25, 2018.
The consultation paper sets out a suite of proposed amendments by the PRA to ensure an operable legal and regulatory framework after the U.K. leaves the EU.
Read more.TOPIC : Brexit for Financial Services -
European Banking Authority Sets Out Its Work Priorities for 2019
10/23/2018
The European Banking Authority has published its Work Programme for 2019, setting out details of, and planned main outputs from, 37 separate work streams across the following five key strategic priorities:
- Leading the Basel III implementation in the EU.
- Understanding risks and opportunities arising from financial innovation.
- Collecting, disseminating and analyzing banking data.
- Ensuring a smooth relocation of the EBA to Paris.
- Fostering the increase of the loss-absorbing capacity of the EU banking system.
The EBA also confirms that work related to Brexit will remain a horizontal priority for the EBA in 2019 and explains that the EBA's other activities may be affected in the future by Brexit-related developments. Should that be the case, any substantial change in the work programme will be communicated in due time, in order to seek steering and approval from its Management Board and Board of Supervisors.
View the EBA's 2019 Work Programme. -
European Commission Announces Work Plan for 2019
10/23/2018
The European Commission has published a Communication, outlining its work plan for 2019. The Communication is addressed to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. The Communication discusses the ongoing challenges for the EU in the run-up to the European Parliamentary elections and the post-Brexit Summit in Sibiu at which a new multi-annual framework for the EU27 will be finalized.
Separately published Annexes to the Communication relating to: (i) new initiatives; (ii) REFIT initiatives; (iii) priority pending proposals; (iv) legislative initiatives that have been withdrawn; and (v) a list of envisaged repeals. Priority pending proposals of particular relevance to financial institutions include legislative proposals relating to the forthcoming sustainable finance package, cross-border distribution of collective investment schemes, crowdfunding, amendments to the European Market Infrastructure Regulation, prudential regulation and supervision of investment firms and a proposed amending regulation relating to minimum loss coverage for non-performing exposures.
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UK Government Publishes Guidance on Proposed Legislation to Onshore EU Legislation on Financial Conglomerates and Groups
10/22/2018
HM Treasury has published explanatory information on the draft Financial Conglomerates and Other Financial Groups (Amendment) (EU Exit) Regulations 2018, which it intends to publish in due course. The draft Regulations will amend deficiencies in the U.K. legislation that implemented the EU Financial Conglomerates Directive. FICOD sets out specific solvency requirements designed to prevent different entities in a conglomerate from using the same capital more than once as a buffer against risk. The Directive also sets out requirements for management controls, risk management and for information sharing between relevant regulators of conglomerates. In the U.K., FICOD has been implemented by the Financial Conglomerates and Other Financial Groups Regulations 2004, as well as through provisions in regulatory rulebooks.
The explanatory information explains that the draft Regulations will amend several deficiencies to ensure the U.K.'s FICOR Regulations remain operative in a U.K.-only context.
Read more.TOPIC : Brexit for Financial Services -
UK Draft Legislation to Onshore the European Market Infrastructure Regulation Published
10/22/2018
HM Treasury has published in draft format the Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 – the U.K.'s draft statutory instrument that would implement a post-Brexit EMIR regime, together with explanatory guidance. The draft EMIR Regulations will affect CCPs, clearing members, their clients, Trade Repositories, TR users and U.K. persons entering into derivatives contracts. They will also, like EMIR, have impacts for persons around the world which enter into derivatives with U.K. persons, through U.K. clearing members or that are ultimately held with CCPs that are regulated or recognized in the U.K.
The draft EMIR Regulations have been prepared to ensure that there continues to be an effective regulatory framework for OTC derivatives, CCPs and TRs in the U.K. after exit day. Onshoring of EMIR has been dealt with in three separate pieces of legislation. The draft EMIR Regulations should be read in conjunction with the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 the Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018, which were published in draft form on July 24, 2018 and October 5, 2018 respectively.
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UK Ring-Fencing Regime to Remain Unchanged in a "No Deal" Brexit Scenario
10/22/2018
HM Treasury has published explanatory guidance on potential changes to the U.K.'s laws on ring-fencing in preparation for a "no deal" scenario in which the U.K. leaves the EU on March 29, 2019. The draft Ring-Fenced Bodies (Amendment) (EU Exit) Regulations 2018 have not yet been published. HM Treasury intends to publish the draft Regulations in due course and to lay them before Parliament before exit day.
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Draft UK Post-Brexit Legislation Published to Onshore the EU Central Securities Depositories Regulation
10/22/2018
HM Treasury has published a draft of the Central Securities Depositories (Amendment) (EU Exit) Regulations 2018, along with explanatory information.
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UK Government's Guidance on Approach to Sanctions in a 'Hard Brexit' Scenario
10/12/2018
The U.K. Foreign and Commonwealth Office has published guidance on the U.K. government's approach to implementing sanctions in the event that no deal is agreed between the EU and the U.K. on the U.K.'s exit from the EU. If there is no deal, the U.K. will leave the EU on March 29, 2019.
The U.K. currently implements sanctions agreed by the UN Security Council, according to international law requirements, and the EU, as provided for in EU legislation and U.K. implementing legislation. In the event of a "hard Brexit," the U.K. would continue to implement sanctions agreed by the UN Security Council and would have the power to adopt other sanctions under the Sanctions and Anti-Money Laundering Act 2018. The FCO would publish the names of individuals and organizations subject to U.K. sanctions.
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Draft UK Post-Brexit Legislation to Onshore the EU Markets in Financial Instruments Package
10/11/2018
HM Treasury has published a draft of the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations are primarily relevant for MiFID II-authorized firms including investment banks, stock and futures exchanges, broker-dealers, investment advisers and investment managers.
The draft Regulations have been prepared in preparation for a "no-deal" scenario, in which the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement. The no-deal scenario would mean that there would be no transitional period following Brexit and that the U.K. would be treated as a third-country after exit day. The changes set out in the draft Regulations will not take effect if the U.K. enters a transition period.
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UK Regulator Provides Information on Brexit Process for Credit Rating Agencies, Trade Repositories and Data Reporting Services Providers
10/10/2018
The Financial Conduct Authority has published three press releases announcing how entities can register with it as a credit rating agency, a trade repository or apply for temporary authorization as a data reporting services provider in preparation for the U.K. leaving the EU without a deal. The press releases follow the draft legislation and explanatory guidance recently published by HM Treasury and the FCA's first consultation on onshoring the EU technical standards through changes to its rulebook.
For credit rating agencies, the U.K. intends to establish a conversion regime (for U.K. CRAs and third-country CRAs currently registered or certified by the European Securities and Markets Authority) and a temporary registration regime (for newly established U.K. entities that are part of a group of CRAs with an existing ESMA registration before exit day). The FCA's CRA press release informs CRAs of how they can notify the FCA of their intention to use one of these regimes and provides an indicative timeline for the legislation and regime to be put into place.
Read more.TOPIC : Brexit for Financial Services -
UK Conduct Regulator Consults on Brexit-Related Changes to Its Rulebook and Binding Technical Standards
10/10/2018
The U.K. Financial Conduct Authority has published its first consultation on proposed changes to the FCA Handbook to ensure a functioning legal and regulatory framework for financial services in the event of a "no-deal" scenario whereby the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement in place and there is consequently no transitional period for firms. The proposed amendments will not take effect if the U.K. enters into a transitional period after exit day.
The consultation includes the FCA's proposals in relation to the Binding Technical Standards it has been empowered by HM Treasury to amend prior to Brexit and to maintain afterward. These are the retained EU "Level 2" delegated and implementing regulations that set out regulatory technical standards and implementing technical standards. The consultation also sets out the FCA's proposed approach to non-legislative "Level 3" materials such as guidelines, recommendations and opinions that will also be onshored.
The FCA states in the consultation that the majority of the proposed changes are consequential in nature and follow the amendments to retained EU law that HM Treasury is proposing, as set out in the series of financial services-related statutory instruments being made under the European Union (Withdrawal) Act 2018.
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UK Conduct Regulator Consults on Post-Brexit Temporary Permissions Regime for EEA Firms and Funds
10/10/2018
The U.K. Financial Conduct Authority has published a consultation on its proposed approach to a Temporary Permissions Regime for EEA firms and investment funds that currently provide services in the U.K. - either via a branch or cross-border - pursuant to a single market passport. The proposed TPR is designed to minimize the potential harm caused by an abrupt loss of the passport in a "no-deal" scenario, in which the U.K. exits the EU without a ratified Withdrawal Agreement, which would mean that there would be no transitional period following Brexit and that the U.K. would be treated as a third-country after exit day. The TPR will enable EEA firms and investment funds to continue to provide services in the U.K. for a limited period following exit day.
The proposed TPR will take effect on March 29, 2019 in the event of no deal. Should the U.K. and EU negotiations lead to ratification of the Withdrawal Agreement, the TPR will not enter into force. Instead, during the transitional period, firms and investment funds would continue to have access to the same passporting arrangements as they do now.
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Post-Brexit UK Law to Exclude EU Laws on the European Supervisory Authorities
10/09/2018
HM Treasury has published guidance stating that the laws establishing the three European Supervisory Authorities and the European Systemic Risk Board will be revoked in their entirety once the U.K. has left the EU. The ESAs are the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority. These ESAs and the ESRB are part of the EU framework for supervision and regulation of the EU financial services sector. The European Union (Withdrawal) Act 2018 automatically incorporates such EU legislation into U.K. laws when the U.K. leaves the EU.
At the point of Brexit, the ESAs and the ESRB will no longer perform functions in relation to the U.K. and the EU legislation that established them will be inoperable in U.K. laws. HM Treasury intends to use a statutory instrument to revoke those laws in their entirety so that they do not become applicable on Brexit. Where other EU legislation automatically incorporated into U.K. law refers to the ESAs or ESRB, statutory instruments will either amend the law or revoke it, as appropriate.
View the guidance.TOPIC : Brexit for Financial Services -
UK Financial Policy Committee Publishes Outcome of its October Meeting
10/09/2018
The Financial Policy Committee has published a statement from its meeting held on October 3, 2018 where it reviewed developments since June 19, 2018. The FPC continues to consider that the U.K. banking system is sufficiently robust to withstand the disruption of a "hard Brexit" and that there is no need for additional capital buffers for banks as a result. The FPC is of the view that the banking system would be able to absorb, in addition to a disorderly Brexit, further costs that might arise from trade tensions. However, the FPC is concerned about the lack of action taken by EU authorities to address the risks of disruption in the event of the U.K. leaving the EU without a deal on March 29, 2019. In particular, the FPC would like mitigating action to be taken to address the risks associated with derivatives contracts and the transfer of personal data.
Aside from the risks presented by Brexit, the FPC considers that domestic risks are still at a standard level overall. However, the FPC is concerned about the swift growth of leveraged lending and intends to: (i) assess the implications for banks in the 2018 stress test; and (ii) review the impact of the increasing role of non-bank lenders and changes in the distribution of corporate debt. The FPC has decided to maintain the U.K. countercyclical capital buffer rate at 1% and will review the rate again at its meeting on November 28, 2018.
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UK Government Proposes Temporary Transitional Powers for UK Financial Regulators to Ease Brexit Adjustments
10/08/2018
HM Treasury has published an Approach Paper setting out its proposal for a temporary transitional power to be given to the U.K. financial regulators to assist firms to adapt to the post-Brexit regulatory framework in an orderly manner in the event of a "no deal" scenario.
It is proposed that the Bank of England, the Prudential Regulation Authority and the Financial Conduct Authority are granted a temporary power to award transitional relief from regulatory requirements where the requirements have been introduced or have changed as a result of onshoring financial services legislation. The power would relate to regulatory requirements in the PRA and FCA rules, onshored EU technical standards, onshored EU financial services regulations or delegated regulations and relevant U.K. primary or secondary legislation. The regulators would be able to grant transitional relief by issuing a "direction" setting out the terms of the relief, including whether the relief would apply to particular firms, classes of firms or to all firms. The power would not be available where a specific transitional arrangement has already been put in place for firms through regulations made under the European Union (Withdrawal) Act because HM Treasury believes that additional relief would not be necessary.
Read more.TOPIC : Brexit for Financial Services -
Draft UK Post-Brexit Regulations to Onshore the EU Bank Recovery and Resolution Directive Published
10/08/2018
HM Treasury has published draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 to onshore the EU Bank Recovery and Resolution Directive in preparation for the U.K.'s exit from the EU. An explanatory guide to the draft Regulations has also been published. The draft Regulations will make changes to the existing U.K. legislation which transposed the BRRD into U.K. law, which is mainly the Banking Act 2009 and the Bank Recovery and Resolution (No 2) Order 2014, and to certain Delegated Regulations adopted by the European Commission under the BRRD. The aim of the draft Regulations is to ensure that the U.K. Special Resolution Regime is "legally and practically workable on a standalone basis" when the U.K. leaves the EU.
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Draft UK Post-Brexit Legislation to Onshore Alternative Investment Fund Managers Directive Published
10/08/2018
HM Treasury has published a draft of the Alternative Investment Fund Managers (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations will onshore the Alternative Investment Fund Managers Directive for Brexit.
The draft Regulations are primarily relevant for Alternative Investment Fund Managers that are already regulated in the U.K. under the Alternative Investment Fund Managers Regulations 2013 and AIFMs currently marketing EEA AIFs in the U.K. They are also relevant for fund managers that market EEA Undertakings for Collective Investment in Transferable Securities (UCITS) into the U.K. HM Treasury has published separately the draft U.K. legislation to onshore EU legislation for UCITS funds for Brexit.
The draft Regulations have been prepared in preparation for a "no-deal" scenario, in which the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement. The no-deal scenario addressed in the draft Regulations involves no transitional period following Brexit and the U.K. being treated as a third-country under EU law after exit day. The changes set out in the draft Regulations will not take effect on exit day if the U.K. enters a transition period.
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Draft UK Post-Brexit Legislation to Onshore EU UCITS Directive Published
10/08/2018
HM Treasury has published a draft of the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations will onshore the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive for Brexit.
The draft Regulations are primarily relevant for EEA fund managers operating UCITS authorized in the U.K., fund managers marketing EEA UCITS into the U.K. and depositaries that provide services to U.K. authorized funds. HM Treasury has also published separately the draft U.K. legislation to onshore EU legislation for Alternative Investment Funds for Brexit.
The draft Regulations have been prepared in preparation for a "no-deal" scenario, in which the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement. The no-deal scenario would mean that there would be no transitional period following Brexit and that the U.K. would be treated as a third-country after exit day. The changes set out in the draft Regulations will not take effect on exit day if the U.K. enters a transition period.
Read more. -
UK Plans Transitional Regime for Credit Ratings for Potential "No Deal" Brexit
10/08/2018
HM Treasury has published explanatory guidance on a proposed U.K. regulation to onshore EU legislation on credit rating agencies in the event of a "no deal" scenario resulting from the EU-U.K. Brexit negotiations. If no deal is reached, the U.K. exits the EU on March 29, 2019. The draft statutory instrument is still being prepared and the approach as set out in the guidance may change as a result. It is expected that the draft SI will be published and also laid before Parliament before the end of the year.
Read more.TOPIC : Brexit for Financial Services -
UK Office of Financial Sanctions Implementation Publishes First Annual Review
10/05/2018
The U.K. Office of Financial Sanctions Implementation has published its Annual Review for the period from April 2017 to March 2018. OFSI was established in March 2016 with the objective of raising awareness of financial sanctions, assessing and addressing suspected sanctions breaches and providing a professional service to the public and industry. The Annual Review provides an overview of:- U.N. and EU financial sanction regimes implemented by OFSI;
- OFSI's work on asset freezing and a breakdown of funds frozen;
- action taken by OFSI following reports of suspected breaches of financial sanctions;
- licenses issued by OFSI during the period; and
- awareness-raising activities.
View the Annual Report. -
Draft UK Post-Brexit Legislation to Onshore Trade Repositories' Obligations and Establish Temporary Recognition Regime
10/05/2018
HM Treasury has published a draft of the Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations are primarily relevant for Trade Repositories in both the U.K. and the EU that are currently registered with and supervised by the European Securities and Markets Authority and that are planning to continue servicing the U.K. market after the U.K.'s exit from the EU on March 29, 2019.
The draft Regulations have been prepared to ensure that the U.K.'s legal framework for reporting of derivatives trades to TRs will continue to operate effectively after exit day. The draft Regulations amend the version of the European Markets Infrastructure Regulation that will be retained on Brexit. The draft Regulations transfer to the Financial Conduct Authority the functions carried out by ESMA for the registration of TRs. They also establish: (i) a temporary registration regime that will enable U.K. and EU TRs that wish to establish a new U.K. legal entity to benefit - on complying with certain requirements - from temporary registration while the FCA considers their application; and (ii) a conversion regime that will allow U.K. TRs that are currently registered with ESMA to be registered as authorized U.K. TRs by the FCA from exit day.
Read more. -
European Securities and Markets Authority Recommends Tightening of Third-Country Requirements
10/01/2018
The European Securities and Markets Authority has published a letter (dated September 26, 2018) from ESMA Chair Steven Maijoor addressed to Valdis Dombrovskis, the Vice President of the European Commission. The purpose of the letter is to contribute to any further work the Commission may undertake on the investor protection and intermediaries-related requirements under the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation.
Read more. -
Scottish Court Says Court of Justice of the European Union Should Rule on Whether Brexit Notification Can Be Revoked
09/21/2018
The Court of Session has delivered an Opinion allowing a reference to be made to the Court of Justice of the European Union for a preliminary ruling on whether the U.K. can unilaterally revoke its notice of withdrawal from the EU - Wightman v Secretary of State for Exiting the European Union [2018] CSIH 62 (21 September 2018).
Under Article 50 of the Treaty on European Union, the United Kingdom gave notice to the EU Council on March 29, 2017 that it would leave the EU. The notification means that unless an agreement is reached between the U.K. and the EU, and absent any agreement to extend the two-year period, the U.K. will exit the EU on March 29, 2019.
Read more.TOPIC : Brexit for Financial Services -
US-UK Financial Regulatory Working Group Holds Inaugural Meeting
09/18/2018
The U.S.-U.K. Financial Regulatory Working Group has issued a statement following its inaugural meeting held on September 12, 2018 in London. Participants discussed the outlook for financial regulatory reforms and future priorities, including possible areas for deeper regulatory cooperation to facilitate further financial services activity between U.S. and U.K. markets. Participants also discussed Brexit-related issues, including: (i) U.S.-U.K. financial regulatory issues resulting from the U.K.’s exit from the EU; and (ii) the implications of Brexit for financial stability and cross-border financial regulation, including contractual continuity and potential cliff-edge risks.
The Working Group was established in April 2018 to serve as a forum for staff from the U.S. Department of the Treasury and HM Treasury and financial regulatory authorities to exchange views on the regulatory relationship between the U.S. and the U.K. Its objectives are to further financial regulatory cooperation, improve transparency, reduce regulatory uncertainty, identify possible cross-border implementation issues, address regulatory arbitrage and work towards achieving compatibility of U.S. and U.K. laws and regulations.
The next meeting of the Working Group will be held in the first half of 2019 in Washington, D.C.
View the statement. -
UK Regulator Publishes Application Requirements for EEA Market Operators Seeking Recognition
09/14/2018
The Financial Conduct Authority has published a direction on how EEA market operators can apply for recognition as an overseas investment exchange in preparation for Brexit. EEA market operators operating a regulated market, a multilateral trading facility or an organised trading facility currently use passports granted under the revised Markets in Financial Instruments Directive to give their U.K.-based members access to their markets. Once the U.K. has left the EU, those passports will no longer be valid and the U.K. Government does not intend to establish a temporary permissions regime in the event of a "no deal" outcome to the EU-U.K. Brexit negotiations or without an agreed implementation period. EEA market operators that engage in regulated activities when providing their U.K. members with access to their markets will need to apply for ROIE status, unless they can rely on the U.K.'s overseas persons exclusion. The FCA's direction sets out the FCA's expectations for EEA market operators.
View the FCA's statement.
View the FCA's Direction. -
Post-Brexit UK Secondary Legislation Published For Temporary Permissions Regime For Payments Services
09/05/2018
HM Treasury has published draft statutory instruments on the regulation of payments and e-money and on access to the Single Euro Payments Area in preparation for the U.K.'s withdrawal from the EU - the draft Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 and the Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018. The draft Regulations are relevant to all Payment Service Providers and registered Account Information Service Providers. The draft Regulations will amend the Payment Services Regulations 2017, Electronic Money Regulations 2011 and the SEPA Regulation to:- Create a temporary permissions regime for EEA payment firms
Read more.TOPIC : Brexit for Financial Services -
UK Government Issues Brexit "No-Deal" Guidance for Financial Services
08/23/2018
HM Treasury has published a technical notice entitled "Banking, insurance and other financial services if there's no Brexit deal," to provide guidance about the impact of the U.K. leaving the EU without a ratified withdrawal agreement in place. The guidance is relevant to financial services firms, funds and financial market infrastructures and to their customers. The technical notice is one of the first 25 of a series of U.K. government technical notices setting out information that will enable businesses and citizens to make informed plans and preparations in the event of the U.K. exiting the EU on March 29, 2019 without a deal. These technical notices include a notice on the government's overarching approach to preparing for a "no deal" scenario.
Read more.TOPIC : Brexit for Financial Services -
UK Releases Draft Legislation to Onshore EU Regulatory Capital Requirements Legislation Post-Brexit
08/21/2018
HM Treasury has released another draft statutory instrument in preparation for Brexit, the Capital Requirements (Amendment) (EU Exit) Regulations 2018 - the draft Capital Requirements Regulations. The EU regulatory capital requirements framework for banks, building societies and investment firms comprises the Capital Requirements Regulation, the Capital Requirements Directive and secondary legislation in the form of technical standards. The CRD is implemented into U.K. law through various sector-specific legislation, for example, the Regulated Covered Bonds Regulations 2008, the Capital Requirements Regulations 2013, the Capital Requirements (Country-by-Country Reporting) Regulations 2013, and the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 as well as through PRA and FCA rules. The CRR and the technical standards are directly applicable across the EU.
This draft Capital Requirements Regulations will amend the CRR to ensure that it continues to operate effectively in the U.K. when the U.K. leaves the EU. The domestic legislation implementing CRD is also amended to ensure that it continues to function as intended. The Prudential Regulation Authority and the Financial Conduct Authority will be responsible for amendments to the technical standards and for updating their rulebooks. They are expected to consult in Autumn 2018 on these aspects.
Read more.TOPIC : Brexit for Financial Services -
UK Government Releases Post-Brexit Draft Legislation for Deposit Protection
08/15/2018
HM Treasury has published draft Deposit Guarantee Scheme and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018. The draft regulations are expected to be laid before Parliament in autumn 2018 and to come into force mostly on the day the U.K. withdraws from the EU. These draft regulations are part of HM Treasury's measures to onshore EU legislation under the provisions of the European Union (Withdrawal) Act 2018. The key changes proposed are:- transferring the power to review, adjust and set the coverage level from EU bodies to the Prudential Regulation Authority, with approval from HMT; and
- removing the cooperation arrangement under which the U.K. Financial Services Compensation Scheme administers compensation payments to depositors at U.K. branches of EEA banks on behalf of EEA deposit guarantee schemes. A transitional provision will allow the FSCS to continue after Brexit to accept instructions and funds from EEA DGS should an EEA firm operating in the U.K. fail immediately before Exit Day.
View the draft Regulations.
View the explanatory guidance.TOPIC : Brexit for Financial Services -
UK Post-Brexit Secondary Legislation on Short Selling Published
08/09/2018
Draft U.K. secondary legislation has been published to onshore the EU Short Selling Regulation on the day the U.K. exits the EU. The draft Short Selling (Amendment) (EU Exit) Regulations 2018 (or U.K. SSRs) are expected to be laid before Parliament in Autumn 2018 and to come into force mostly on the day the U.K. withdraws from the EU. The draft U.K. SSRs are made under the provisions of the European Union (Withdrawal) Act 2018 to address failures of retained EU law relating to short selling to operate effectively and other deficiencies arising from Brexit.
The explanatory guide to the U.K. SSRs states that changes for firms with shares admitted to trading on a U.K. venue should be minimal. The procedure for notifying U.K. instruments to the Financial Conduct Authority will be kept and instruments admitted to trading on U.K. venues will continue to have the same restrictions applied to them.
Read more.TOPIC : Brexit for Financial Services -
UK Financial Conduct Authority Confirms it is Open to a Range of Booking Models for Brexit Preparations
08/08/2018
The U.K. Financial Conduct Authority has published a "Dear CEO" letter on firms' cross-border booking models in preparation for Brexit. In the letter the FCA reminds firms that where the firm is expanding its European presence, it must still be possible for the FCA to supervise the firm's U.K. business and firms must still meet their threshold conditions. However, unlike other EU regulators, the FCA is not stipulating specific requirements for booking models. Instead, the FCA states that it is "open to a broad range of legal entity structures or booking models. This includes those making use of back-to-back and remote booking, providing their associated conduct risks are effectively controlled and managed. Our starting point is therefore not to restrict business models but to understand the principles and practice involved and how the conduct risks that arise from them are managed."
Read more.TOPIC : Brexit for Financial Services -
UK White Paper Published on How the Withdrawal Agreement Will Be Implemented in the UK
07/24/2018
The U.K.'s Department for Exiting the EU has published a further Brexit white paper, entitled: "Legislating for the Withdrawal Agreement between the United Kingdom and the European Union." The paper describes the Bill that will implement the terms of the Withdrawal Agreement in the U.K. The Bill, which must pass before exit day (March 29, 2019) will only be introduced once Parliament has approved the finalized Withdrawal Agreement as required under the EU (Withdrawal) Act 2018. In the paper, the Government sets out how it envisages the Bill will implement the U.K.'s withdrawal and provides detail on those parts of the draft Withdrawal Agreement that have been agreed so far: citizens' rights, the implementation period and the negotiated financial settlement. The final provisions of the Bill will be subject to the final terms of the Withdrawal Agreement. The paper also sets out the procedures for Parliament's approval of the terms of the final Withdrawal Agreement.
Read more.TOPIC : Brexit for Financial Services -
UK Legislation Published for a Post-Brexit Recognition Regime for CCPs
07/24/2018
A draft of the Central Counterparties (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 has been laid before Parliament. The finalized Regulations will come into force partly on the day after the day they are made and fully on the day the U.K. withdraws from the EU.
The draft Regulations have been prepared using the power under the European Union (Withdrawal) Act 2018 to address failures of retained EU law to operate effectively or other deficiencies arising from the withdrawal of the U.K. from the EU. These draft Regulations deal with "onshoring" certain aspects of the European Market Infrastructure Regulation that relate to the regulatory framework for CCPs. The Bank of England wrote to non-U.K. CCPs in December 2017, outlining how it envisaged that non-U.K. CCPs will be recognized to provide services in the U.K. once the U.K. has withdrawn from the EU. Recognized status under EMIR enables third-country CCPs to provide clearing services to clearing members or trading venues established in the EU. The BoE explained in its letter that U.K. domestic law requirements for the recognition of non-U.K. CCPs would be substantially the same as the current requirements under EMIR, although references to international MoUs being in place would change, such that these must be established between third countries and relevant U.K. authorities.
Read more. -
UK Secondary Legislation Published for Post-Brexit Temporary Permissions Regime
07/24/2018
A draft of one of several pieces of U.K. legislation has been published, that will establish a temporary permissions regime after the U.K.'s withdrawal from the EU. Temporary permission will be available for EEA firms currently operating in the U.K. under financial services passports. The draft EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 are expected to be laid before Parliament in Autumn 2018 and to come into force mainly on the day after they are made, apart from some provisions that will apply on the day the U.K. withdraws from the EU. The draft Regulations also amend the Financial Services and Markets Act 2000 and related legislation to remove references to EEA passport rights.
The draft Regulations have been prepared under the provisions of the EU (Withdrawal) Act 2018, which sets out an enhanced scrutiny procedure for secondary legislation used to amend certain retained EU law. This means that the draft Regulations will require the approval of both Houses of Parliament before they are made.
Read more.TOPIC : Brexit for Financial Services -
UK Plans Temporary Designation Regime for Settlement Finality Designation Post-Brexit
07/24/2018
The U.K. Government has announced that it intends to legislate to ensure, after U.K. withdrawal from the EU, the continuation of U.K. settlement finality protections currently provided under the Settlement Finality Directive and implemented in the U.K. by the Financial Markets and Insolvency (Settlement Finality) Regulations 1999. The SFRs establish various insolvency carve-outs for designated market infrastructure systems and also legislate for finality of transactions within such systems. However, only EU systems are in scope.
The SFD requires Member States to notify the European Securities and Markets Authority with information concerning the national systems (and the respective system operators) they have designated to be included within the scope of the SFD protections. Member States must also designate the national authorities that must be notified when insolvency proceedings are opened against a participant or a system operator. Under the protections afforded by the SFD, transfer orders which enter into designated systems within certain deadlines are guaranteed to be finally settled, regardless of whether the sending participant has become insolvent or transfer orders have been revoked in the meantime. Under the SFD, each Member State automatically recognizes systems that have been designated by other Member States.
Read more. -
European Commission Presses for Step Up in Brexit Preparations
07/19/2018
The European Commission has published a Communication on preparing for the withdrawal of the U.K. from the EU on March 30, 2019. Alongside the Communication, a factsheet has been published entitled, "Seven Things Businesses in the EU27 Need to Know in Order to Prepare for Brexit." In the Communication, the Commission warns all stakeholders that "[p]reparation must therefore be stepped up immediately at all levels and taking into account all possible outcomes." The Commission highlights that it is not yet certain that an agreement will be in place by exit day (March 30, 2019) and that a cliff-edge scenario could still occur. Without ratification of the Withdrawal Agreement, there will be no transitional period providing a further 21 months to prepare for when EU law ceases to apply to and in the U.K. and the Commission is urging all stakeholders to prepare for all scenarios.
In the Communication, the Commission counsels the financial services sector (see page 14) to prepare for a "hard Brexit." The Commission advises that ensuring that there is no disruption to their current business model and that they can continue to serve clients is the responsibility of all operators in all financial services sectors. Notably, the Commission is not concerned, at this stage, about any contractual continuity issues on the principle that the performance of existing obligations can continue post-Brexit. However, the Commission notes that "every type of contract needs to be looked at separately."
Read more.TOPIC : Brexit for Financial Services -
UK Secondary Legislation Laid Before Parliament Amending Building Societies Legislation
07/16/2018
A draft of the Building Societies Legislation (Amendment) (EU Exit) Regulations 2018 has been laid before Parliament. The Regulations will come into force on the day the U.K. withdraws from the EU.
The draft Regulations have been prepared using the power under the European Union (Withdrawal) Act 2018 to address failures of retained EU law to operate effectively or other deficiencies arising from the withdrawal of the U.K. from the EU. The draft Regulations make amendments to various U.K. primary and secondary legislation that relate to building societies. The amendments remove references to EEA countries and territories, EU directives and EU member states that will no longer be appropriate following the U.K.'s withdrawal. In addition, the amendments remove provisions that provide reciprocal treatment to borrowers whose loans are secured on land in an EEA state and to bodies incorporated in an EEA state.
Read more.TOPIC : Brexit for Financial Services -
UK Secondary Legislation Laid Before Parliament on Regulators' Powers to Onshore EU Technical Standards on Brexit
07/16/2018
A revised draft of the Financial Regulators' Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 has been laid before Parliament. The Regulations will come into force the day after the day on which they are made.
The draft Regulations, which include some changes to the original draft published in April 2018, among other things empower the Bank of England, the Financial Conduct Authority, the Prudential Regulation Authority and the Payment Systems Regulator to make EU Exit instruments and to make any necessary amendments to the Regulatory Technical Standards and Implementing Technical Standards that comprise "level 2" of the EU financial services legislation that will be onshored (that is, converted into U.K. law) on the U.K.'s withdrawal from the EU. A schedule to the draft Regulations sets out a full list of technical standards that will be onshored and allocates responsibility for making EU Exit instruments to one or more of the regulators.
The draft Regulations have been prepared under the EU (Withdrawal) Act 2018, which sets out an enhanced scrutiny procedure for secondary legislation used to amend certain retained EU law. This means that the draft Regulations will require the approval of both Houses of Parliament before they are made.
View the draft Regulations.
View the draft explanatory memorandum.
View details of the proposed approach to onshoring EU legislation.
View details of the EU (Withdrawal) Act 2018.TOPIC : Brexit for Financial Services -
European Securities and Markets Authority Urges UK Financial Institutions to Apply for EU Authorizations Now
07/12/2018
The European Securities and Markets Authority has issued a public statement urging U.K.-based financial institutions to prepare for a hard Brexit. In particular, ESMA states that firms wishing to continue providing services across the EU after the U.K. has exited the EU must make timely applications for authorization to the relevant national regulators in the EU member state in which the firm wants to relocate its business. ESMA notes that it has seen an increase in applications being made and highlights that some national regulators have stipulated that applications needed to be received in June/July 2018 for approval to be granted in time.
View ESMA's statement.TOPIC : Brexit for Financial Services -
UK Government Publishes White Paper on the Future Relationship Between the UK and the EU
07/12/2018
The U.K. Government has published a White Paper setting out its approach and proposals for a future relationship between the U.K. and the EU. The Government is proposing new economic and regulatory arrangements for financial services that would give both the EU and the U.K. autonomy over decisions regarding access to its market. The Government acknowledges that both the EU and the U.K. will want to legislate for their own interests to take account of the differences in the EU and U.K. markets, business models as well as financial stability exposures.
The Government does not intend to replicate the existing EU passporting regime, which is reserved for countries falling within the single market. Instead, the Government intends that the new arrangements would be based on an enhanced equivalence regime that would enable the cross-border provision of the most important financial services and would preserve regulatory and supervisory cooperation. The Government states that the existing equivalence frameworks would need to be expanded, because the EU's equivalence regime does not cover the breadth of U.K. and EU financial services provision and because there are no provisions which ensure a transparent and predictable process with lasting effect.
Read more.TOPIC : Brexit for Financial Services -
UK Financial Policy Committee Outlines Steps to Reduce Risks to the UK's Financial Stability
07/03/2018
The Bank of England has published a Financial Stability Report, dated June 2018, and a record of the Financial Policy Committee Meeting held on June 19, 2018. The Report sets out the FPC's view of the U.K.'s financial stability, the resilience of the U.K.'s financial system and the risks posed to each of those. Where applicable, the Report also notes the steps that the FPC is taking to address the risks. The record of the meeting provides a summary of issues discussed by the FPC in June.
Read more. -
First UK Statutory Instrument Made Under the European Union (Withdrawal Act) 2018
07/03/2018
The European Union (Withdrawal) Act 2018 (Commencement and Transitional Provisions) Regulations 2018 have been made. These Regulations are the first statutory instrument to be made under the EU (Withdrawal) Act 2018, which was made on June 26, 2018. The Regulations bring into force some of the provisions of the Act. The Act, which was also formerly referred to as the Great Repeal Bill, ensures that the U.K.'s laws will continue to operate from the day the U.K. exits the EU.
View the Regulations.
View details of the EU (Withdrawal) Act 2018.TOPIC : Brexit for Financial Services -
UK Government and Regulators Set Out Approach to Onshoring Financial Services Legislation for Brexit
06/27/2018
Following the enactment of the European Union (Withdrawal) Act 2018, HM Treasury has set out its approach to "onshoring" EU financial services legislation under the Act. The Bank of England, the Financial Conduct Authority and the Payment Systems Regulator have each also issued statements on their respective roles in preparing for the U.K.'s withdrawal from the EU.
Read more.TOPIC : Brexit for Financial Services -
UK Brexit Legislation Receives Royal Assent
06/26/2018
The EU (Withdrawal) Bill has received Royal Assent from Her Majesty the Queen and has become an Act of Parliament, the EU (Withdrawal) Act 2018. The Act, which was also formerly referred to as the Great Repeal Bill, is necessary to ensure that the U.K.'s laws continue to operate from the day the U.K. exits the EU.
From the date of the U.K.'s exit from the EU, the Act will (i) end the supremacy of EU law in U.K. law by repealing the European Communities Act 1972; (ii) convert EU law as it stands at the moment of exit into domestic law before the U.K. leaves the EU; and (iii) maintain the current scope of devolved decision making powers in areas currently governed by EU law.
The Act also creates powers to make secondary legislation, including temporary powers to enable corrections to be made to the laws that would otherwise no longer operate appropriately once the U.K. has left the EU and to implement the withdrawal agreement under Article 50 of the Treaty on European Union. The Government will now start work to begin laying before Parliament the expected 800 pieces of secondary legislation that will be required to prepare the U.K.'s statute book for EU withdrawal.
Read more.TOPIC : Brexit for Financial Services -
European Banking Authority Warns Financial Institutions to Prepare for a Hard Brexit
06/25/2018
The European Banking Authority has published an Opinion on preparations for the withdrawal of the U.K. from the EU. The Opinion is addressed to EU national regulators and regulators in the European Free Trade Area States (Norway, Liechtenstein and Iceland), the European Central Bank and the Single Resolution Board. The Opinion concerns the activities of financial institutions in the context of preparing for the U.K.'s withdrawal. Financial Institutions comprise credit institutions, investment firms, payment service providers, electronic money institutions, creditors and credit intermediaries.
The purpose of the Opinion is to encourage national regulators to ensure that financial institutions are adequately considering the risks that arise from the possible departure of the U.K. from the EU in March 2019 without a ratified withdrawal agreement in place (a so-called "hard" Brexit). The EBA also seeks to ensure that national regulators draw the attention of financial institutions to their consumer protection obligations should that eventuality occur.
Read more.TOPIC : Brexit for Financial Services -
European Securities and Markets Authority Publishes Annual Report
06/19/2018
The European Securities and Markets Authority has published its Annual Report, dated June 15, 2018. The report sets out ESMA's key achievements against its 2017 objectives of promoting supervisory convergence, assessing risks to investors, markets and financial stability, completing a single rulebook for the EU financial markets and directly supervising trade repositories, credit rating agencies and third-country CCPs. The report also discusses ESMA's contributions to the work of the Joint Committee of the European Supervisory Authorities.
The report does not consider the focus areas for ESMA in 2018, which are set out in ESMA's work programes. However, ESMA indicates that in 2018 it will be, among other things: (i) issuing further opinions on pre-transparency waivers under the Markets in Financial Instruments package; (ii) engaging with credit rating agencies and trade repositories on their strategy, governance, operational matters and preparations for Brexit; and (iii) continuing its work to finalize the technical standards and technical advice under the EU Prospectus Regulation.
View ESMA's Annual Report. -
European Banking Authority Issues Annual Report for 2017
06/18/2018
The European Banking Authority has published its Annual Report for 2017.
The Annual Report summarizes the progress made in a number of workstreams undertaken by the EBA in 2017, including the EBA's work on: (i) developing and maintaining an EU Single Rulebook for banking; (ii) promoting supervisory convergence; (iii) developing resolution policies and promoting common approaches for the resolution of failing financial institutions; (iv) determining and monitoring key risks in the banking sector across Europe; (v) strengthening the EBA's role as EU data hub for the collection, use and dissemination of banking data; (vi) protecting consumers, monitoring financial innovation and contributing to easy retail payments in the EU; (vii) Brexit preparations; (viii) international engagement; and (ix) cross-sectoral work by the European Supervisory Authorities under the Joint Committee.
Read more. -
UK Sanctions and Anti-Money Laundering Act 2018 Receives Royal Assent
05/23/2018
The Sanctions and Anti-Money Laundering Act 2018 has received Royal Assent and came partly into force on May 23, 2018. The majority of the provisions of the Act will enter into force on a day appointed by the Secretary of State. The Act will provide a domestic sanctions framework after the U.K. leaves the EU, enabling the U.K. to continue to meet its international obligations and use sanctions as a national security and foreign policy tool.
The Act's provisions empower the U.K. Government to make sanctions regulations to be imposed, where appropriate, to comply with United Nations obligations or other international obligations, to further the prevention of terrorism, for the purposes of national security or international peace and security, or to further foreign policy objectives. The Act also empowers the U.K. Government to create, amend and update regulations for the detection, investigation and prevention of money laundering and terrorist financing and for the purposes of implementing standards published by the Financial Action Task Force relating to combating threats to the integrity of the international financial system.
View the Sanctions and Anti-Money Laundering Act 2018. -
EU and UK to Establish Technical Working Group for Risk Management Around Brexit
04/27/2018
The European Commission and HM Treasury have announced that the European Central Bank and the Bank of England will establish a technical working group on risk management in the period around March 30, 2019 for financial services. The U.K. leaves the EU on March 29, 2019, although the provisionally agreed transition period means that most EU laws will continue to apply in the U.K. until December 31, 2020.
The Terms of Reference for the working group state that the European Commission and HM Treasury will attend the group as observers. Other regulatory authorities will be invited to attend on an issue-specific basis.
View the announcement.
View the terms of reference.TOPIC : Brexit for Financial Services -
US and UK Establish Financial Regulatory Working Group
04/19/2018
The U.S. Treasury Department and HM Treasury have issued a joint statement announcing the establishment of a Financial Regulatory Working Group. The Working Group will be a forum for treasury staff and financial regulatory authorities to exchange views on the regulatory relationship between the United States and the U.K. The objectives of the Working Group will be to further financial regulatory cooperation, improve transparency, reduce regulatory uncertainty, identify possible cross-border implementation issues, address regulatory arbitrage and work towards achieving compatibility of U.S. and U.K. laws and regulations.
View the statement. -
European Supervisory Authorities Make Recommendations to Address Risks in EU Securities, Banking and Insurance Sectors
04/12/2018
The Joint Committee of the European Supervisory Authorities has published a report on risks and vulnerabilities in the EU financial system. The ESAs are the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority. The ESAs make recommendations for policy actions by the ESAs, national regulators and financial institutions. A summary of the risks and recommendations contained in the report is set out below.- To combat cyber risks, the ESAs recommend that financial institutions should continue to improve IT systems, explore risks in the context of information security and take steps to resolve risks surrounding connectivity and outsourcing to third-party providers. The ESAs will continue to keep these risks under review. ESMA is launching a supervisory project on cloud computing outsourcing and will continue work to address supervisory convergence. The EBA is developing guidelines on the management of information and communication technology risks. EIOPA is conducting a qualitative exercise on cyber risk with national regulators and the industry.
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UK Financial Conduct Authority Publishes its 2018/19 Business Plan
04/09/2018
The Financial Conduct Authority has published its Business Plan for 2018/19 which sets out its key priorities for the coming year. The FCA confirms that it will continue to focus on issues relating to the U.K.'s withdrawal from the EU by working with the Government, ensuring appropriate transition measures for EEA firms, working towards operational readiness and cooperating at international level.
The FCA divides the remainder of its priorities into cross-sector priorities and sector priorities. There are seven cross-sector priorities: firms' culture and governance; financial crime and anti-money laundering; data security, resilience and outsourcing; innovation, big data, technology and competition; treatment of existing customers; long-term savings, pensions and intergenerational differences; and high-cost credit. There are seven sector priority areas: wholesale financial markets; investment management; retail lending; pensions and retirement income; retail investments; retail banking; and general insurance and protection. The FCA also published Sector Views for each of these sectors which provide an FCA view of how each sector was performing as of mid-2017.
Read more. -
UK Prudential Regulation Authority Publishes its 2018/19 Business Plan
04/09/2018
The Prudential Regulation Authority has published its Business Plan for 2018/19 which sets out its strategic goals and workplan to deliver those goals. The PRA also published a consultation paper on its fees and levies for 2018/19 alongside the Business Plan as well as a report to the Prudential Regulation Committee on the adequacy of PRA resources and independence of PRA functions.
Read a summary of the PRA's goals and workplan. -
UK Regulators Confirm Approach to Authorization and Supervision of International Banks, Investment Firms, Insurers and CCPs Under Brexit Transitional Agreement
03/28/2018
Following the announcement on March 19, 2018 that a transitional period for Brexit had been agreed between the U.K. and the EU, the U.K. regulators have published statements setting out their expectations regarding firms' preparations for the U.K.'s withdrawal from the EU. The agreed transitional period is from March 29, 2019 until December 31, 2020 and EU law will remain applicable in the U.K. during that time. Both the Financial Conduct Authority and the Bank of England have stated that, subject to the ratification of the transitional agreement, firms carrying on regulated activities in the U.K. through an EU passport can plan to continue doing so during the implementation period on the same basis as they do now and that U.K. authorization would only be needed by the end of that period.
The BoE has also confirmed its approach to the authorization and supervision of international banks, designated investment firms and insurers. The Prudential Regulation Authority has published "Dear CEO&" letters addressed to the CEOs and branch managers of banks, insurers and designated investment firms that undertake cross-border activities between the U.K. and the rest of the EU, together with updated Policy Statements and Supervisory Statements on the PRA's approach to the branch authorization and supervision of EEA banks, insurers and designated investment firms. Following consideration of feedback to the PRA's consultation on updating its approach to branch authorization and supervision, the PRA confirms that it has not made any significant changes to the versions it consulted on, except that the threshold for liabilities protected by the Financial Services Compensation Scheme has been increased from £200 million to £500 million. The PRA's new approach for banks, investment firms and insurers comes into effect on March 29, 2018.
Read more.TOPIC : Brexit for Financial Services -
UK and EU Negotiators Agree Brexit Transition Period
03/19/2018
The European Commission and the U.K. government have jointly published the latest draft withdrawal agreement for the U.K.'s departure from the EU which, among other things, reflects the agreement reached on the post-Brexit transition period.
The draft withdrawal agreement includes some sections which are agreed (subject to legal drafting) and others which remain to be finalized. It includes final wording concerning an agreed "transition" or "implementation" period, that will run until December 31, 2020. The draft agreement departs from the previous draft circulated by the European Commission on March 15, 2018, by providing that the U.K. will be free to negotiate, sign and ratify international agreements in its own capacity during the transition. Any agreements negotiated by the U.K. must not enter into force or apply during the transition period, unless authorised by the EU.
The draft agreement also contains the agreed legal text for citizens' rights and concerning the financial settlement, as well as agreed text on a number of other provisions. Financial services and other services remain among issues that are not addressed by any agreed text. The U.K. and EU negotiators aim to finalize the entire withdrawal agreement by October 2018.
View the draft withdrawal agreement.TOPIC : Brexit for Financial Services -
UK Financial Conduct Authority Launches Survey for EEA Firms Operating in the UK Under Single Market Passports
03/09/2018
The U.K. Financial Conduct Authority has launched a short online survey seeking information from European Economic Area firms currently operating in the UK under a passport. The information obtained will identify those firms for which a “temporary permission” may be relevant following the U.K.’s withdrawal from the European Union. The possibility of a “temporary permission regime” was raised by HM Treasury in December 2017 as a means by which firms previously operating under a passport would be able to enter into new business and fulfil existing contracts with U.K. customers for a period of time after exit day, while seeking full authorization in the U.K.. HM Treasury has not yet prepared legislation relating to the temporary permissions regime, and EU-U.K. negotiations are in any event ongoing, however the FCA believes that it is likely that firms operating under a passport would need to inform it of their intention to operate under the temporary regime via a straightforward notification process in advance of the U.K.’s withdrawal.
Read more.TOPIC : Brexit for Financial Services -
UK Prime Minister Speech on the UK’s Future Economic Partnership with the EU
03/02/2018
The U.K. Prime Minister delivered her third major speech on the future partnership between the U.K. and the European Union following Brexit. In it, the Prime Minister restated the key elements and provided greater detail about the U.K.’s aims for a free trade agreement with the EU post-Brexit.The Prime Minister was candid about the fact there are some “hard facts” to be accepted, one of which is that access to each other’s markets may in certain ways be less than it is now. Two key aspects of the speech are of particular interest for financial services businesses and their advisers.
Read moreTOPIC : Brexit for Financial Services -
European Securities and Markets Authority Outlines 2018 Work Programme for Credit Rating Agencies, Trade Repositories and Monitoring of Non-EU CCPs
02/08/2018
The European Securities and Markets Authority has published a document combining its 2017 Annual Report and 2018 Work Programme in relation to Trade Repositories, Credit Rating Agencies and third-country Central Counterparties.ESMA is the single direct supervisor of Credit Rating Agencies and Trade Repositories in the European Union. It also has direct responsibilities regarding the registration, supervision and recognition of TRs based outside the EU. The 2017 Annual Report highlights its direct supervisory activities and key achievements in 2017 in respect of eight registered TRs, 26 registered CRAs and four certified CRAs. ESMA recognised 10 third-country CCPs in 2017 and conducted monitoring of the activities and services provided by those third-country CCPs in the EU.
ESMA has conducted a supervisory risk assessment regarding CRAs and TRs in the EU. The 2018 Work Programme sets out the supervisory priorities for the year ahead that ESMA has identified for CRAs and TRs and also highlights issues affecting both CRAs and TRs where ESMA will be conducting further work. These areas include Brexit, fees charged by CRAs/TRs, internal control frameworks, cloud computing and guidelines for periodic information.
Read more.
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European Securities and Markets Authority Outlines 2018 Plans for EU Supervisory Convergence
02/07/2018
In addition to the key priorities, the 2018 programme also sets out ESMA key objectives and main planned outputs in relation to a number of thematic and cross-cutting issues, including: investor protection and intermediaries; secondary markets; investment management; market integrity (including market abuse and benchmarks); post-trading (including CCPs, securities financing and settlement); corporate finance (in particular the new prospectus regime); corporate reporting; market data; financial innovation; IT infrastructure; and peer reviews.
The European Securities and Markets Authority has published its Supervisory Convergence Work Programme for 2018. It highlights a total of five key priorities for its work on supervisory convergence in 2018, comprised of three ongoing priorities (application of the revised Markets in Financial Instruments framework, data quality and investor protection) and two new priorities (Brexit and financial innovation).
Read more.
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European Commission Publishes Position Paper on Brexit Transitional Period
02/07/2018
The European Commission has published a position paper, titled "Transitional Arrangements in the Withdrawal Agreement", which has been prepared by its Task Force for the Preparation and Conduct of the Negotiations with the United Kingdom.
A transitional period was agreed in principle in December 2017. The stated aim of the position paper is to outline in legal terms how arrangements for the transition period following Brexit should be given effect in the eventual Withdrawal Agreement. Draft clauses for the Withdrawal Agreement relate to the duration of the transition period, the application of EU law to the UK during the transition, the extent to which the UK Parliament and the Bank of England can participate in the EU institutions and the extent to which the UK can participate in the EU's international activities or conclude its own international agreements.
The position paper also contains a draft clause giving jurisdiction to the European Court of Justice to rule on disputes during the transition period. A footnote to the draft clause calls for a mechanism to be put in place within the Withdrawal Agreement whereby the EU would be allowed to "suspend certain benefits deriving for the United Kingdom from participating in the internal market" in circumstances where the EU considers that the ECJ would not provide remedies within an appropriate timeframe.
The negotiations between the UK and EU will resume in March 2018.
View the position paper.
TOPIC : Brexit for Financial Services -
Andrew Bailey, Head of the Financial Conduct Authority Discusses Brexit
02/05/2018
The Chief Executive of the Financial Conduct Authority, Andrew Bailey, gave a speech on Brexit at the Future of the City dinner. Mr. Bailey called for a joint commitment by the political authorities to a defined implementation period before the end of March this year and confirmed that the FCA regards Brexit as a top priority. He discussed the operational issues that may arise as a result of Brexit, for example, contractual continuity for derivatives and insurance contracts, UK CCP clearing services and the holding and sharing of data. He also highlighted that mutually agreed and enacted provisions in both the UK and the EU were needed to properly address these matters. The FCA is working with the UK Government to ensure that the UK has a functioning regulatory regime on the date of Brexit and during any transitional period. The UK Government has confirmed that it will introduce draft legislation, if needed, to ensure an interim regulatory permissions regime and to ensure contractual continuity.
In addition, Mr. Bailey discussed the advantages to both the EU and the UK of adopting a mutual recognition regime post-Brexit which continues the existing open financial markets. He noted that during the EU's negotiations with the US on the Transatlantic Trade and Investment Partnership, the EU proposed the inclusion of financial services in the trade agreement, which was based on mutual recognition and close regulatory cooperation, and suggested that the proposal could be used as a starting point for the EU and UK to agree a framework for mutual recognition.
View the text of the speech.TOPIC : Brexit for Financial Services -
Nausicaa Delfas Appointed as Executive Directive of International at the Financial Conduct Authority
02/01/2018
The Financial Conduct Authority has appointed Nausicaa Delfas as Executive Directive of International. The appointment creates a new role at the FCA and highlights the importance of developing the FCA's strategy for international engagement, especially in the lead up to the UK's withdrawal from the EU.
View the FCA's press release. -
UK Regulators Confirm Approach to Authorization and Supervision of International Banks, Investment Firms, Insurers and CCPs Post-Brexit
12/20/2017
The Bank of England, the Prudential Regulation Authority and the Financial Conduct Authority have published consultations and planning considerations affecting international banks, investment firms, insurers and CCPs conducting cross-border activities into and from the UK. The UK Government has also made an announcement that, if necessary, it will legislate to enable EEA firms and funds operating in the UK to obtain a “temporary permission” to continue their activities in the UK for a limited period after withdrawal. Alongside the temporary permissions regime, it will also legislate, if necessary, to ensure that contractual obligations, such as insurance contracts, which are not covered by the temporary regime, can continue to be met. It will also bring forward secondary legislation to empower UK authorities to carry out functions currently carried out by EU authorities relating to CCPs, central securities depositaries, credit rating agencies and trade repositories.
Read more.TOPIC : Brexit for Financial Services -
UK Government's Strategy for the UK's Asset Management Industry
12/06/2017
HM Treasury has published the second UK Investment Management Strategy which sets out the UK Government's long-term strategy for ensuring that the UK remains a globally competitive location for asset management. The Government believes that action should be taken now to respond to the challenges and the opportunities for the asset management industry arising out of Brexit, and that this is the best time to renew the 2013 Strategy, which focused mostly on fund domicile issues.
Read more. -
EU Proposed Regulation Moving the European Banking Authority to Paris Due to Brexit
11/29/2017
The European Commission has published a proposed Regulation to formalize the decision to move the European Banking Authority from London to Paris as a result of the decision by the UK to leave the EU. The proposed Regulation will apply from the date on which the European Union Treaties cease to apply to the UK or from March 30, 2019, whichever is earlier. The proposed Regulation only confirms the move and does not address any of the operational aspects.
Feedback on the proposed Regulation is possible until January 29, 2018.
View the proposed Regulation.TOPIC : Brexit for Financial Services -
UK Financial Stability Report Published
11/28/2017
The Financial Policy Committee of the Bank of England has published the latest UK Financial Stability Report. The FPC notes that the UK banking system is resilient and that UK banks are stronger than they were 10 years ago. The results of the stress test show that no bank needs to improve its capital position. However, as a result of the stress test, the FPC has decided to raise the UK countercyclical buffer rate from 0.5% to 1% from November 28, 2018. In addition, the Prudential Regulation Committee will set capital buffers for individual banks. The FPC will reconsider the countercyclical buffer rate during the first half of 2018.
The FPC continues to assess the risks posed by Brexit and concludes that Brexit presents a material risk to the provision of financial services to customers in both the UK and the EU. Three main risks are discussed: risks associated with bringing EU legislation into UK law through the Great Repeal Bill, risks to the continuity of outstanding cross-border contracts and risks presented by barriers to cross-border financial services provision.
The FPC considers that the extent and nature of the changes to be brought in through the Great Repeal Bill will depend on the terms of the UK's withdrawal agreement and there is a tight timeframe in which it all needs to be achieved. In addition to the Great Repeal Bill, secondary legislation is needed, and the regulators will need to change their rulebooks. Firms will also need to make changes to comply with the amended legal framework.
Read more. -
European Central Bank Highlights Challenges for Smaller Eurozone Firms
11/08/2017
The European Central Bank has published a Report on the supervision of less significant institutions under the Single Supervisory Mechanism. The SSM is made up of the ECB and national regulators of Eurozone member states, and is responsible for the prudential supervision of all banks in the euro area. The ECB directly supervises the larger firms, classified as significant institutions, and national regulators directly supervise the less significant institutions, subject to the oversight of the ECB. The ECB is also responsible for certain common procedures, such as the granting and withdrawal of authorization and the acquisition of qualifying holdings in SSM firms. The ECB can issue guidelines, regulations or general instructions to the SSM national regulators or even take over the direct supervision of a less significant institution (at its own initiative or at the request of the national regulator).
The ECB's Report discusses the main concerns for less significant institutions, which include competition, and suggests that less significant firms may choose to consolidate businesses to improve profitability. The Report also sets out the steps that the SSM supervisory functions have taken towards harmonizing supervisory approaches to level the playing field, and highlights that the key challenge that needs to be addressed is the use of different accounting systems because that hinders comparability of data between the firms. Finally, the ECB indicates that it is developing specific policy positions and operational guidance on issues relevant to Brexit and the likely relocation of some activities of UK firms moving into the Eurozone.
View the report. -
US Regulator Warns EU about Proposed Extraterritorial Overreach
11/06/2017
The Commodity Futures Trading Commission Chairman J. Christopher Giancarlo has authored an opinion piece in the Wall Street Journal warning of potential consequences if the European Union mishandles Britain's impending exit from the EU. The European Commission's proposed amendments to the European Market Infrastructure Regulation and the regulation establishing the European Securities and Markets Authority would provide ESMA and the European Central Bank with greater supervisory powers over third-country CCPs. Specifically, Chairman Giancarlo argued that the European Commission’s proposed rulemaking that would authorize regulation of financial entities outside the EU by the European Central Bank and ESMA would result in overlapping and uncoordinated regulation in US financial markets. Chairman Giancarlo believes this lack of harmonization and clear jurisdictional limitations could prove expensive and damaging to US economic growth and ultimately impact job growth. Additionally, Chairman Giancarlo suggests that submitting to European rules could set a dangerous precedent going forward which could result in further imposition of European costs and regulatory burdens on the US economy.
View the article. -
Brexit: European Banking Authority Warns Against Letter-Box Entities
10/12/2017
The European Banking Authority has published an Opinion on issues relating to Brexit where a UK firm seeks to establish an entity within the EU27. The Opinion is addressed to the European Commission, national regulators of member states, the European Central Bank in its role as bank prudential supervisor for entities established in the eurozone and to national regulators in Norway, Lichtenstein and Iceland (as per the EEA Agreement). The Opinion is intended to provide guidance on supervisory expectations and to address regulatory and supervisory arbitrage issues that may arise as firms consider establishing entities within the EU27 before the date of the UK's exit from the EU. The Opinion covers areas such as the authorization process, equivalence access for investment services, internal model approvals, resolution and deposit scheme issues and internal governance and risk management. In particular, the Opinion addresses outsourcing and risk transfers using back-to-back or intragroup transactions. The EBA states that 'letter-box' or 'empty shell' entities do not meet the existing regulatory requirements and that national regulators should assess whether outsourcing is being used solely as a means of obtaining an EU passport. The EBA also considers that a group with a new EU27 entity that uses back-to-back or intragroup transactions to transfer risk must have enough capital, risk management and operational capabilities to absorb any material unhedged or unsecured portfolio in the event of the default of the group entity to which the risks have been transferred.
View the EBA's Opinion. -
EU Final Draft Technical Standards on the Trading Obligation for Derivatives Published
09/28/2017
The European Securities and Markets Authority has published a final Report and final draft Regulatory Technical Standards on the trading obligation for derivatives under the Markets in Financial Instruments Regulation. The trading obligation is applicable to classes of derivatives that: (i) have been declared subject to the clearing obligation under the European Market Infrastructure Regulation, (ii) are admitted to trading or traded on at least one EU trading venue (a regulated market, multilateral trading facility, organized trading facility or a third country equivalent trading venue) and (iii) are sufficiently liquid. The trading obligation will apply to financial counterparties and to non-financial counterparties. Where ESMA determines that a class of derivatives should be subject to the MiFIR trading obligation, third country trading venues would only be permissible for trading by EU entities when determined to be equivalent by the European Commission.
The final draft RTS on the trading obligation provide for the trading obligation to apply to fixed-to-float interest rate swaps denominated in euros, US dollars and pound sterling and to index credit default swaps (iTraxx Europe Main and iTraxx Europe Crossover). The trading obligation for both IRS and CDS will apply from January 3, 2018, unless the clearing obligation for a particular class of derivatives has not yet entered into force.
Read more. -
European Commission Legislative Proposals for Enhanced Powers for European Supervisory Authorities and the European Systemic Risk Board09/20/2017
The European Commission has published legislative proposals designed to strengthen and further integrate the supervisory framework of the European Union. The proposals build on contributions to the Commission's public consultation in autumn 2016 on the European Systemic Risk Board and its public consultation in spring 2017 on the European Supervisory Authorities – the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority.
Read more. -
European Banking Authority Issues Final Draft Regulatory and Implementing Technical Standards on Applications for Authorization of Credit Institutions
07/14/2017
The European Banking Authority has published its final draft Regulatory Technical Standards setting out a comprehensive list of the information that must be provided to national regulators by firms applying for authorization as a credit institution under the Capital Requirements Directive. The final draft RTS are accompanied by final draft Implementing Technical Standards which set out the various procedures and requirements for making applications, along with a template to be used and guidance on how national regulators should deal with incomplete applications. The next step is for the European Commission to consider the draft RTS and ITS with a view to making a decision whether to endorse them via delegated legislation. In an accompanying press release, the EBA urges the Commission to consider adopting the RTS and ITS at the earliest opportunity to enable processing of applications from entities seeking to relocate to continental Europe in the context of the UK's withdrawal from the European Union.
View the EBA Final Report.
View the Press Release. -
Great Repeal Bill Introduced to UK Parliament
07/13/2017
The draft legislation for the exit of the UK from the European Union has been introduced to the House of Commons. The European Union (Withdrawal) Bill 2017-2019, which has previously been referred to as the Great Repeal Bill and also as the Repeal Bill, is a legislative measure which performs four main functions. It will: (i) end the supremacy of EU law in UK law by repealing the European Communities Act 1972; (ii) convert EU law as it stands at the moment of exit into domestic law before the UK leaves the EU; (iii) create powers to make secondary legislation, including temporary powers to enable corrections to be made to the laws that would otherwise no longer operate appropriately once the UK has left the EU and to implement the withdrawal agreement under Article 50 of the Treaty on European Union; and (iv) maintain the current scope of devolved decision making powers in areas currently governed by EU law. The Bill must pass through both Houses of Parliament before it can receive Royal Assent.
View the European Union (Withdrawal) Bill 2017-2019.
View the Explanatory Notes to the Bill.
View webpage for the Bill.
View the Shearman & Sterling Client Briefing.TOPIC : Brexit for Financial Services -
European Securities and Markets Authority Issues Sector-specific Principles on Relocations from the UK to EU27 in the Context of the UK's Exit from the EU
07/13/2017
The European Securities and Markets Authority has published three Opinions setting out sector-specific principles for Brexit-related relocations in the sectors of investment management, investment firms and for secondary markets. These sector-specific Opinions build on a cross-sector Opinion published in May 2017. The principles do not set out any new legal requirements, but they are intended to serve as practical tools to support supervisory convergence among national regulators in EU27 countries when approached by UK market participants seeking to relocate in the content of the UK's exit from the EU. The Opinions have been published in the wake of reports that some member state regulators have been marketing their jurisdictions as locations for business and it has been thought that some regulators may have been offering a lighter-touch form of regulatory and especially "presence" standards than others.
The Opinions, which assume (without prejudice to ongoing negotiations) that the UK will become a third country on exit from the EU, highlight particular issues national regulators in EU27 should consider when considering applications from relocating market participants. Factors for close consideration include governance structure and internal control, the impact and influence of group membership, the nature and extent of proposed outsourcing arrangements and the need to mitigate the risk of letter-box entities. ESMA also recommends that national regulators consider co-operation arrangements with third country regulators where appropriate.
View Opinion on Investment Firms.
View Opinion on Investment Management.
View Opinion on Secondary Markets. -
European Commission Recommends Draft Brexit Negotiation Directives
05/03/2017
The European Commission has adopted a Recommendation for a Council Decision authorizing the Commission to open Article 50 negotiations with the United Kingdom. This Recommendation includes a draft negotiation directive in the Annex, which covers the first phase of the negotiations and prioritizes matters which have been identified as important to ensure an orderly withdrawal.
View the Recommendation.
View the draft negotiation directive.TOPIC : Brexit for Financial Services -
EU Publishes Guidelines for Brexit Negotiations
04/29/2017
The European Council has published Guidelines outlining the proposed framework and stances for its negotiations with the UK under Article 50 of the Treaty on the European Union and setting out the overall positions and principles that the EU will seek. The UK gave notification of its intention to leave the EU on March 29, 2017.
View the Guidelines.
View the related European Commission press release.TOPIC : Brexit for Financial Services -
UK Government Consults on the UK's Legal Framework for Financial Sanctions upon Brexit
04/21/2017
The UK Government has published a consultation on the UK's future legal framework for imposing and implementing financial sanctions upon Brexit. The UK currently adopts sanctions through EU legislation, which is effective via the European Communities Act 1972.
Read more.TOPIC : Brexit for Financial Services -
UK Regulator Requests Brexit Contingency Planning Assurance
04/07/2017
The Prudential Regulation Authority has published a letter to CEOs and branch managers of all banks, insurers and designated investment firms undertaking cross-border activities between the UK and the remainder of the EU, including branches of EU firms operating in the UK, concerning the need for contingency planning for the UK's withdrawal from the EU. The PRA has requested that each firm provides, by July 14, 2017, written confirmation that it has considered its contingency plans, a short summary of the plans, assurance that the plans address an appropriately wide range of scenarios and whether any new authorization or regulatory engagement is required. EU branches operating in the UK which have significant retail or SME transactional deposits should consider, among other things, whether they need to convert their operation into a UK subsidiary. The Financial Policy Committee will be overseeing the plans to mitigate any risks to financial stability.
View the letter.TOPIC : Brexit for Financial Services -
Prime Minster Theresa May Triggers Article 50 Brexit Negotiations
03/29/2017
UK Prime Minster Theresa May formally notified the European Council of the UK's intention to withdraw from the European Union in accordance with requirements set out in Article 50 of the Treaty on the European Union. Prime Minister May sent a letter to the President of the Council, Donald Tusk, which sets out the approach the UK Government seeks to take in discussing its exit from the European Union over the next two years.
View the letter.
You might like to view our Brexit resource page, which is available here. -
UK Financial Policy Committee Post-Brexit Referendum Financial Stability Report
11/30/2016
The Bank of England published its latest Financial Stability report. In the Report, the Financial Policy Committee explains the key risks affecting the UK financial system, how it is addressing these risks and the developments since the Brexit referendum. The Report also includes a summary of the results of the Bank of England's 2016 bank stress test.
The first part of the Report outlines in detail the Committee’s analysis of major risks posed to the stability of the UK economy and the action it is taking in light of such risks. The second part of the Report contains a summary of the Committee’s analysis of those risks and of the resilience of the financial system. The Committee comments that since the Referendum, financial stability in the UK has been maintained despite a challenging period of uncertainty around the domestic and global economic outlook. For example, there have been significant movements in asset prices, including a 12% fall in the sterling exchange rate index. The Committee also comments that the outlook for financial stability in the UK remains challenging as the economy has entered into a period of adjustment. Since July, vulnerabilities that stem from the global economic environment and financial markets have further increased, such as the expected expansionary fiscal policy that could follow the recent US election. The Committee comments that the UK banking system is capitalized to sustain the provision of financial services when faced with severe stresses. Since the global financial crisis, UK banks have built up capital resources with the aggregate common equity Tier 1 capital held by major UK banks now at 13.5% of risk-weighted assets (as at September 2016).
Read more. -
UK Bank of England Governor Set to Stay Through Brexit Transition
10/31/2016
The Governor of the Bank of England, Mark Carney, announced that he would be extending his term of office at the Bank by a year to the end of June 2019. Mr. Carney commented that the extension of his term of office would go beyond the expected time for Brexit which should help to contribute to a smooth transition to the UK's new relationship with the EU.
View the announcement. -
European Commission Establishes Brexit Negotiation Task Force for UK Exit Negotiations
09/14/2016
The European Commission established a task force to prepare and conduct negotiations with the United Kingdom. The Task Force will assist the Commission on all strategic, operational, legal and financial issues related to the negotiations. Sabine Weyand, currently Deputy Director-General in the Commission's trade department (DG TRADE) will become the Deputy Chief Negotiator as of 1 October 2016. The announcement follows the appointment of Michel Barnier as Chief Negotiator on July 27, 2016. Mr. Barnier will commence his role from October 1, 2016. The Commission noted that once the UK triggers the process to leave the EU, Mr. Barnier will then make the necessary contacts with the UK authorities.
View the press release.
You might like to view our Brexit resource page, which is available here. -
UK's Financial Policy Committee Responds to Brexit Vote by Eliminating the Countercyclical Buffer for Bank Capital
07/05/2016
The Bank of England published its latest Financial Stability Report in which the Bank's Financial Policy Committee sets out the key risks to the UK's financial system and weighs them against the resilience of the system. In March 2016, the FPC had identified areas through which there could be increased risk to the UK's financial stability as a result of the vote by the UK public to leave the EU. Such areas include financing of the UK's large current account deficit, the commercial real estate market, the high level of household indebtedness, limited growth in the global economy and vulnerabilities in the functioning of the financial markets. The FPC states that there is evidence that some of these risks have begun to crystallize and that the current outlook for financial stability is challenging. The FPC is monitoring closely the risks of, amongst other things, further deterioration in investor appetite for UK assets, adjustments in commercial real estate markets tightening credit conditions and reduced and fragile liquidity in core financial markets.
To support the supply of credit and in support of market functioning, the FPC has reduced the UK countercyclical capital buffer rate from 0.5% to 0% of banks' UK exposures with immediate effect. This rate is expected to remain in effect until June 2017, and will reduce regulatory capital buffers by £5.7 billion. The FPC continues to monitor the risks closely.
View the report.
You may like to view our client publications and webinar materials on the impact of Brexit, available here. -
US Federal Reserve Board Governor Powell Delivers Speech on the Impact of Brexit
06/28/2016
US Federal Reserve Board Governor Jerome Powell delivered remarks to the Chicago Council on Global Affairs, highlighting the impact of Brexit on the outlook for the US economy.
Governor Powell voiced concern that the Brexit vote has the potential to create new headwinds for economies around the world, including the United States. He noted that while it may be “far too early to judge the effects of the Brexit vote,” it will be important to assess implications for the US economy, and for the stance of policy to foster continued progress towards the objectives of maximum employment and price stability in the United States.
Governor Powell noted that for some time, the principal risks to the US labor market recovery and economic growth have been from abroad. Due to the high and continuously appreciating trade-weighted value of the US dollar, the economy inevitably “imports” trading partners’ weak economic performances and financial volatility. Powell stated that to successfully contain the impact of the British referendum, the Federal Reserve Board is “prepared to provide dollar liquidity through existing swap lines” with central banks to address pressures in global funding markets. Powell also noted that while financial conditions have “tightened” since the Brexit vote, markets have continued to function in an “orderly” manner and the US financial markets remain resilient.
View Governor Powell’s speech.