On March 28, 2018, following the announcement on March 19, 2018 that a transitional period for Brexit had been agreed between the U.K. and the EU, the U.K. regulators published statements setting out their expectations regarding firms' preparations for the U.K.'s withdrawal from the EU. The agreed transitional period is from March 29, 2019 until December 31, 2020 and EU law will remain applicable in the U.K. during that time. Both the FCA and the Bank of England have stated that, subject to the ratification of the transitional agreement, firms carrying on regulated activities in the U.K. through an EU passport can plan to continue doing so during the implementation period on the same basis as they do now and that U.K. authorization would only be needed by the end of that period.
The BoE has also confirmed its approach to the authorization and supervision of international banks, designated investment firms and insurers. The Prudential Regulation Authority has published "Dear CEO" letters addressed to the CEOs and branch managers of banks, insurers and designated investment firms that undertake cross-border activities between the U.K. and the rest of the EU, together with updated Policy Statements and Supervisory Statements on the PRA's approach to the branch authorization and supervision of EEA banks, insurers and designated investment firms. Following consideration of feedback to the PRA's consultation on updating its approach to branch authorization and supervision, the PRA confirms that it has not made any significant changes to the versions it consulted on, except that the threshold for liabilities protected by the Financial Services Compensation Scheme has been increased from £200 million to £500 million. The PRA's new approach for banks, investment firms and insurers comes into effect on March 29, 2018.
The PRA has not changed its current supervisory approach to U.K. subsidiaries of international banks. Banks undertaking material retail activity above de minimis thresholds will (as now) need to establish a subsidiary. Other banks must satisfy the PRA's minimum expectations. Where the PRA deems the branch to be systemically important, there must be adequate means to enable the PRA to gain sufficient assurance over the supervisability of the branch. This includes enhanced cooperation with the home regulator and greater reassurance over resolvability. The PRA can also impose additional specific regulatory requirements at branch level.
The BoE has also published a "Dear CEO" letter addressed to CEOs of non-U.K. CCPs that provide services in the U.K. The BoE confirms that non-U.K. CCPs already providing services in the U.K. should be able to continue to do so until the end of the implementation period. The BoE encourages these CCPs to continue to engage with it on their future recognition and to consider how to best use the additional time for planning.
The FCA's statement is available at: https://www.fca.org.uk/news/statements/fca-statement-eu-withdrawal-following-march-european-council and the BoE's statement is available at: https://www.bankofengland.co.uk/news/2018/march/update-on-the-regulatory-approach-to-preparations-for-eu-withdrawal.
The PRA "Dear CEO" letter is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2018/firms-preparations-for-the-uk-withdrawal-from-the-eu-update-march-2018.pdf, the PRA's Policy Statement on the approach to bank branch authorization and supervision is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/ps318.pdf and the PRA's Supervisory Statement on the approach to bank branch authorization and supervision is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2018/ss118.pdf.
The BoE "Dear CEO" letter is available at: https://www.bankofengland.co.uk/-/media/boe/files/letter/2018/ccps-preparation-for-the-uk-withdrawal-from-the-eu-update-march-2018.pdf
The PRA's Policy Statement on the approach to insurer branch authorization and supervision is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/ps418.pdf and the PRA's Supervisory Statement on the approach to insurer branch authorization and supervision is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2018/ss218.pdf,
The Brexit transitional agreement is available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/691366/20180319_DRAFT_WITHDRAWAL_AGREEMENT.pdf.
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