The European Securities and Markets Authority (ESMA) is “prepared for the UK to become a third party”, according to panellists at this year’s Association of the Luxembourg Fund Industry (ALFI) European Asset Management Conference.
The ALFI panel that looked at the European regulatory landscape, interviewing speakers from ESMA and the European Fund and Asset Management Association (EFAMA).
An audience member questioned the panel on whether ESMA was responsible for providing “a very short time frame within the industry, almost leaving us hanging off the edge of a cliff in preparing for Brexit”.
The audience member added: “Could [Brexit] be a massive disruption to consumers and destroy what we're trying to create—a better Capital Markets Union?”
The ESMA panellist said that “both sides, [the UK and the EU], want a clear transition regime.”
The representative from ESMA explained: “So much of UK rule is governed by UK law, what we’re doing is being prepared for the UK to become a third party, working with trade repositories and others. We are saying ‘tell us the plans you need to have ready.’”
He added: “We will do everything we can to get a memorandum of understanding in place with the UK.”
The ESMA representative said that the agreement would probably “be similar to the one we have with Taiwan, Chile and Canada. We hope to negotiate with the UK and UK regulators.”
He also listed custody services as a major priority in these negotiations.
The ESMA and EFAMA representatives agreed that “one year is not much time”, alluding to the timeframe between now and March 2019, when the UK is expected to leave the EU.
Another audience member questioned passporting activity post-Brexit, he asked: “It’s curious in a time of such globalisation, that passport arrangement for the UK looks like it will be very hard to achieve, it’s so easy in Japan and similar countries. Are you cherry picking?”
The ESMA representative replied: “Prime minister Theresa May and the UK government have said that passporting wouldn’t work. In an open financial market, there is a small difference in regulation, in terms of how and where business takes place.”
He added: “Once you're outside of [the EU] there are different elements to participation, but there are still possibilities for third countries. The idea of passporting is tied to EU membership, it is a very legal framework once you’re out of the EU.”
