Wednesday 28 Mar 2018

GOVERNMENT RESPONSE TO COMMUNICATIONS FROM THE BANK OF ENGLAND AND FINANCIAL CONDUCT AUTHORITY

Responding to the regulators’ announcements, the Chancellor, Philip Hammond, said:

“In December, we were clear that we would do all that we could to ensure that the UK regulators have the powers they need to support a smooth and orderly exit from the EU.

“The Council’s endorsement of an agreement on an implementation period brings important clarity to businesses across the UK. Together with today’s announcements from the regulators, it will provide further confidence to financial services firms that there will be a smooth exit.

“Regulators have recognised that firms cannot alleviate the risks of a cliff-edge on their own, which is why the UK government and our regulatory authorities are working to provide the reassurance that firms need."

Contact Information

Charles McKnight
charles.mcknight@hmtreasury.gov.uk

Notes to editors

The Bank of England has today:

welcomed the agreement between the UK and EU27 that there should be an Implementation Period until the end of 2020 as part of the UK’s Withdrawal Agreement with the EU;
made clear to relevant firms, in letters published today, that they may plan on the assumption that UK authorisation or recognition will only be needed by the end of the implementation period; and
confirmed its approach to the authorisation and supervision of international banks, insurers and central counterparties (CCPs). In the context of their future preparations for the UK’s withdrawal from the EU, EEA banks and insurers may (if they are not conducting material retail business) apply for authorisation to operate as a branch in the UK. Non-UK CCPs should continue engaging with the Bank on the UK recognition process.

The FCA has today:

welcomed the agreement reached on the terms of an implementation period that will apply following the UK’s withdrawal from the European Union;
confirmed that, in light of the agreement on the terms of an implementation period and the UK Government’s commitment to providing for a Temporary Permission Regime as a backstop, firms and funds currently benefiting from an EU passport need not apply for an FCA authorisation at this stage;
reiterated that firms and funds that will be solo-regulated by the FCA that they will need to notify the FCA of their desire to benefit from the regime. Notification will not require submission of an application for authorisation. The FCA will set out further details on these proposals later in the year; and
said that UK firms and funds passporting into the EEA should discuss with their relevant EU regulator the implications of a transitional period for their contingency planning. The FCA will continue to cooperate closely with the home state regulators of EEA firms and the European Supervisory Authorities and will stand ready to work with them to address any risks to consumer protection and financial stability.

In-bound firm announcements

On 20 December 2017, the government announced that it will bring forward legislation to create temporary permissions regimes if necessary, to ensure that relevant firms are able to continue their activities in the UK for a limited period after withdrawal.

This move provided reassurance for UK customers of EEA financial services firms, such as the 6 million consumers who currently have insurance policies with these firms, that their policies will still be serviced in the unlikely event of no deal.

It also meant that we will be able to both protect financial services jobs in the UK as well as deliver a level playing field for financial services firms once we leave the EU. UK-based financial and related professional services employ 7.3% of the UK’s working population, over 2.2 million people, two thirds of whom are outside London.