By Amy Leisinger, J.D.
HM Treasury has set out its approach to financial services statutory instruments (SIs) under the EU (Withdrawal) Act. According to the ministry, during the implementation period, the UK will continue to implement new EU law that comes into effect and be treated as part of the EU’s single market and access between UK and EU markets will continue on current terms. The Act converts the existing body of applicable EU law into UK domestic law, and HM Treasury plans to delegate authority to the UK’s financial services regulators to address any deficiencies resulting from Brexit.
The publication notes that the implementation period agreed to by the UK and the EU will be in place between March 29, 2019, and December 31, 2020, providing time to introduce new arrangements, but that UK firms will need to comply with any new EU legislation during the implementation period. EU and third-country infrastructures with existing EU authorization will continue to be able to provide services to the UK to prevent disruption. A stable process for maintaining equivalent regulatory outcomes and a collaborative relationship between supervisors is crucial to protecting both UK and EU financial systems, the HM Treasury explains.
In addition to addressing the possibility of a ‘no deal’ scenario, the publication notes that the Act gives ministers the power to prevent or mitigate any failure of retained EU law to operate effectively, and HM Treasury intends to provide regulators with the ability to introduce transitional measures to phase in onshoring changes and the authority to address deficiencies or redundancies that may arise when the UK leaves the EU.
EU firms operating in the UK would broadly become subject to the same supervisory regime that the UK already applies to other countries, but the ministry acknowledges that a different approach may be necessary in certain circumstances to minimize disruption, avoid unintended consequences for service continuity, and provide protection for UK consumers.
HM Treasury intends to lay the first financial services onshoring SIs in the near future, the first providing a temporary permission regime and delegating authority to cure deficiencies to UK financial services regulators.