101 UK Brexit Notes

Connemara Programme October 16 2018 pg. 46 The government has also committed to using the powers in the European Union (Withdrawal) Act 2018 to provide the financial services regulators with a general transitional tool that will allow them to phase in post-exit regulatory requirements for firms where these are related to the UK leaving the EU, including firms in the TPR and TRR. This will give firms the necessary time to adjust, and avoid cliff-edges at the point of exit. The government will transfer functions currently carried out by European bodies to the appropriate UK body. Along with these unilateral actions, the government is committed to working with our European partners to identify risks arising from a no deal scenario. The Bank of England and the European Central Bank (ECB) have convened a technical working group, as announced by HM Treasury and the European Commission, focusing on risk management in the period around 29 March 2019, in the area of financial services. Where necessary, the Bank of England and the ECB will invite other relevant authorities, such as the Financial Conduct Authority, where their expertise is required to support discussions. Implications for individuals and business customers How customers of financial services firms will be affected will depend on where they are based, where their firm is based and under what regulatory authorisations they operate, and the services that that they access. If action by customers is needed, then firms should communicate this to their customers at an appropriate time. Individual and business customers - UK-based customers of UK based providers For UK-based customers accessing domestic services in the UK provided entirely by UK-based providers, there is unlikely to be any change as a result of exit. If UK customers will be affected by their firm’s planning for exit, then this should be clearly communicated to customers by the firm. Some EEA firms that provide deposit taking and retail banking services in the UK do so via a UK-authorised subsidiary. There will be no change to their UK authorisation as a result of the UK leaving the EU, and they will be able to continue providing services . You can find out whether your firm is authorised by the UK regulators by looking it up on the Financial Services Register , checking correspondence from your firm, checking your firm’s website, or contacting them directly. In this scenario, UK-based payment services providers would lose direct access to central payments infrastructure – such as TARGET2 and the Single Euro Payments Area (SEPA) – meaning customers (including business using these providers to process euro payments) could face increased costs and slower processing times for Euro transactions. The government is looking to align payments legislation to maximise the likelihood of remaining a member of SEPA as a third country. This would ensure lower value Euro transactions are processed in the same amount of time as they are today. The cost of card payments between the UK and EU will likely increase, and these cross-border payments will no longer be covered by the surcharging ban (which prevents businesses from being able to charge consumers for using a specific payment method). Individual and business customers - UK-based customers of EEA firms operating in the UK For UK-based customers who access banking, insurance, investment funds and other financial services with EEA firms currently passporting into the UK, the temporary permissions regimes will enable these firms to continue to provide those services to UK customers for up to three years after exit. This will allow time for these firms to apply for authorisation to continue operating in the UK. If they receive authorisation covering the full scope of the services that they currently provide, then they will be able to continue to provide services as before. The UK’s Financial Services Compensation Scheme (FSCS) protects customers of UK-authorised firms who have eligible products in the case of firm failures, including some products with EEA firms. The regulators will consult on arrangements for continuing this coverage this autumn. Individual and business customers – EEA customers (including UK citizens living abroad) of UK firms operating in the EEA By contrast, in the absence of action from the EU, EEA-based customers of UK firms currently passporting into the EEA, including UK citizens living in the EEA, may lose the ability to access existing lending and deposit services, insurance contracts (such as a life insurance contracts and annuities) due to UK firms losing their rights to passport into the EEA, affecting the ability of their EEA customers to continue accessing their services. This could impact these firms’ ability to continue to service their existing products. For example, the UK is a major centre for investment banking in Europe, with UK investment banks providing investment services and funding through capital markets to business clients across the EU. In the absence of EU action, EEA clients will no longer be able to use the services of UK-based investment banks, and UK-based investment banks may be unable to service existing cross-border contracts. The government has committed to putting in place unilateral action, if necessary, to resolve these issues as far as possible on the UK side. For example, the government has committed to continue to treat prospectuses that are valid in the UK before exit (including those approved by a competent authority in a different EU member state) as valid for the remainder of the 12 months from their date of approval, including where that includes a period after the UK exits the EU. However, the UK authorities are not able through unilateral action to fully address risks to the EEA customers of UK firms currently providing services into the EEA using the financial services passport. The government is committed to working with EU partners to identify and address such risks.