Treasury has published guidance for the banking, insurance and other financial services sectors on the impact of what it still describes as an “unlikely” no-deal Brexit scenario. It stresses that increased preparations towards a no-deal were always likely to be necessary the closer Brexit becomes and that accelerating the plans does not mean the Government believes no deal is now more likely than it previously was.
To help businesses understand what they would need to do in a no-deal scenario, the Government has now produced a framing notice, explaining its overall approach, and specific guidance on how the Government is working to ensure a functioning financial services regulatory framework in any scenario.
The guidance explains:
- the planned temporary permissions regime to allow passporting-in firms the opportunity to apply for full authorisation and continue operating in the UK as they do so;
- the intention to legislate if necessary to ensure contractual obligations not protected by the temporary permissions regime can continue to be met;
- the approach for temporary recognition for non-UK CCPs and the Bank of England’s approach to recognition going forwards;
- the intention to also bring forward legislation for transitional arrangements for CSDs, Credit Rating Agencies, Trade Repositories, DRSPs, systems under the Settlement Finality Directive and depositaries for authorised funds;
- the potential for suing powers in the EU (Withdrawal) Act to allow the regulators to phase in post-exit regulatory requirements, to avoid cliff-edges;
- the transfer of functions currently carried out by European bodies to UK ones;
- how the Government is working with European partners to identify risks that arise from no-deal;
- impacts on customers, including likely increases in costs of card payments between the UK and EU and the fact that cross-border payments will no longer be covered by the ban on surcharging;
- plans to consult on continuing coverage of the FSCS for firms under the temporary permissions regime;
- what the UK is doing to try to address the risks for those outside the UK dealing with UK firms – and the fact that the UK cannot unilaterally address all these risks;
- how the UK is pressuring to reach agreement with EU counterparts on permitted delegation of portfolio management; and
- the risks to financial market infrastructure of the EU not taking various actions – including what the UK is doing to try to allow EU providers to continue to serve UK firms and customers, and what will not be possible if the EU does not act (specifically, that UK trading venues will not be “EU trading venues” and therefore EEA firms may not be able to be members of the venues and the venues will not be eligible venues for them to execute certain trades, which, ultimately, may mean EEA firms cannot trade certain derivatives, if the only markets are in the UK).
The guidance also refers to the various other publications by Government and regulators over recent weeks, aimed at helping firms to prepare for all eventualities.