The Bank of England has outlined its approach to financial services legislation under the European Union (Withdrawal) Act.
This is intended to ensure that there is a complete and robust legal framework for financial regulation in the UK, whatever the outcome of negotiations between the EU and the UK, when the UK withdraws from the EU on 29 March 2019.
The bank said that HM Treasury plans to lay a number of statutory instruments (SIs) to make the legal changes required to achieve this aim.
“HM Treasury 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.”
The Bank added that HM Treasury also confirmed its intention, subject to parliamentary approval, to delegate powers to the financial services regulators (Bank of England, PRA, FCA, Payment Systems Regulator) to make the required changes to onshored Binding Technical Standards (BTS).
The regulators will be responsible for maintaining those BTS going forward, it said. The regulators would also be able to make changes to their own rulebooks using delegated EU (Withdrawal) Act powers.
The Bank said that as regulator it intends to consult, in coordination with the FCA when appropriate, on proposed changes to onshored BTS and rules this autumn.
The Bank plans to do this following HM Treasury’s publication in draft, or laying before parliament, of SIs relating to most of our regulatory remits.
The Bank explained that 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 HM Treasury’s proposed amendments to relevant onshored legislation.
The changes set out in HM Treasury’s SIs, and the Bank’s changes to BTS and rules, would largely only come into force on 29 March 2019 in the eventuality that the implementation period is not put in place.
In case the implementation period does not take effect on the 29 March 2019, HM Treasury confirmed that it will bring forward legislation under the EU (Withdrawal) Act shortly to create temporary permissions and recognition regimes, the Bank noted.
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 (or recognition) from UK regulators without disruption to their business.
If the implementation period, which has been agreed in principle as part of the UK’s Withdrawal Agreement with the EU, 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, said the Bank. 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 said that it 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, therefore, 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.
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