HM Treasury has also confirmed its intention, subject to parliamentary approval, to delegate powers to the financial services regulators, such as Bank of England, PRA, FCA and Payment Systems Regulator to make the required changes to the binding technical standards (BTS).
The regulators will be responsible for maintaining those BTS going forward. The regulators would also be able to make changes to their own rulebooks using delegated EUWA powers.
The Financial Conduct Authority’s role
The Financial Conduct Authority is getting ready for a range of scenarios, including one in which the UK leaves the EU on 29 March 2019 without a withdrawal agreement and implementation period having been ratified between the UK Government and the EU.
The EU Withdrawal Act will transfer and convert existing EU law at the point of exit into UK law. It also gives powers to Ministers to make secondary legislation to amend this legislation to ensure it functions effectively when the UK leaves the EU.
As part of this, the Treasury intends to task the FCA with amending and maintaining EU binding technical standards. These rules sit underneath EU regulations and directives and provide technical detail on how those requirements must be met.
In the run up to March 2019, the FCA will limit handbook changes unrelated to Brexit to those identified as core priorities in its business plan as well as other essential items.
The Bank of England’s approach to financial services legislation under the EUWA
The Bank as regulator intends to consult, in co-ordination with the FCA when appropriate, on proposed changes to onshore BTS and rules this autumn.
This will allow firms, including financial market infrastructures, to be able to review and comment upon the proposed changes to BTS and the regulators’ rulebooks in the context of HMT’s proposed amendments to relevant onshored legislation.
Further, HMT has set out that it intends to provide regulators with powers to grant transitional relief, where appropriate, to ensure that, in a scenario in which an implementation period is not in place, firms and Financial Market Infrastructures (FMIs) have enough time to comply with the changes.
HMT has set out that this is necessary as a contingency against a scenario in which the implementation period, which has been agreed in principle as part of the UK’s Withdrawal Agreement with the EU, does not take effect on 29 March 2019.
Against the possibility that the implementation period does not take effect on the 29 March 2019, HMT today confirmed that it will bring forward legislation under the EUWA shortly to create temporary permissions and recognition regimes.
This will allow firms, including non-UK central counterparties, to continue their activities in the UK for a time-limited period after the UK has left the EU even if there is no implementation period.
Those firms that wish to continue carrying out business in the UK in the longer term will also be able to use this time limited period to seek to obtain full authorisation from UK regulators without disruption to their business.
If the implementation period takes effect on the 29 March 2019, the UK would continue to be treated as part of the EU’s single market in financial services.
It means that EU law would continue to apply to UK firms as it does now, and firms will be able to operate on the same basis as they do now.
The Bank expects firms to comply with EU law during the implementation period.
Under the terms of the draft Withdrawal Agreement, EU law would continue to apply in the UK during that period, from 29 March 2019 until 31 December 2020. UK firms should plan on the assumption that requirements arising from new EU legislation that come into effect during this period will apply to UK firms and FMIs.