However, the regulator also said an implementation period as suggested under Theresa May’s draft withdrawal agreements is preferable.
Such a period would provide benefits by removing ‘cliff-edge risks’ and give a bridge in future relations with the EU, the FCA said.
There are still outstanding uncertainties over firms and public sector ability to implement a smooth transition, the regulator noted in an analysis provided to the Treasury Select Committee.
Under a no-deal, passporting rights would cease to apply and the UK would no longer be part of the EU legal frameworks that provide for supervisory cooperation and data sharing between member states.
As such, question remarks remain over the extent to which the European Union (EU) and UK are able to treat each other’s regulations as equivalent, including for the purposes of sharing data.
It is also not clear how much supervisory cooperation would take place to manage the separation of shared systems for market oversight, the FCA said.
The regulator also stressed it would be crucial the government has put in place relevant statutory instruments.
The FCA said it is working with the Bank of England’s Financial Policy Committee (FPC) and other UK authorities to monitor the risks of disruption to UK financial services arising from Brexit.
