The regulator is working with the Bank of England and the government to develop a number of “safeguards and contingencies” in the event of a hard-edged Brexit to “ensure day one works smoothly.”
The loss of cross-border passporting of financial services is just one of the risks ahead, which the FCA can partly resolve itself alongside other elements which need agreement with the EU.
Contract continuity is another issue, largely for insurance contracts and derivatives potentially affecting 10m UK policyholders and 38m European Economic Area policyholders.
Not pay out claims
Speaking today, Nausicaa Delfas, the FCA’s executive director of international said: “If this is not achieved, there is a risk that some of these contracts could not be appropriately serviced – in concrete terms, insurers may not be permitted to pay out claims on policies, and derivatives users may not be able to manage the risks of their positions. This would not enhance the integrity of markets, nor serve the interests of consumers, either in the UK or in the EU.”
However, Delfas said a BoE and European Central Bank technical group is already working on this which the regulator welcomes.
The existing EU legal framework will also be converted into UK Law after March 2019 and existing laws which implement EU obligations will be preserved or amended by statutory instrument if necessary.
‘Good outcome is achievable’
Temporary permissions are also being granted to European firms and funds using a UK passport so they can continue to operate, among a raft of other regulatory support efforts.
“The scale of the Brexit challenge is unprecedented, but we believe a good outcome is achievable,” the regulator said.
“We all know that time is tight and the path uncertain – so achieving that outcome, and a smooth transition avoiding cliff edges – requires energy and commitment from industry and regulators alike.”
Delfas said the regulator will continue to meet its three statutory objectives to secure appropriate protection for consumers, protect and enhance the integrity of the UK financial system and promote effective market competition.