Brexit update for financial services firms - from 26 October 2019 to 1 November 2019

United Kingdom

This week put Brexit preparations on the back-burner as the Article 50 exit date was put back and the ratification of the revised Withdrawal Agreement (“WA”) by the UK Parliament was abandoned in favour of a general election. We will therefore be pausing our weekly email commentary until the New Year.

The Article 50 extension (see Document 5 below) delays the UK's exit until 11.00 pm GMT on 31st January 2020. Exit could also take place under the WA (as reflected in the decision) on 1st December 2019 or 1st January 2020 (if ratification is completed by both sides by then), but this now seems a purely theoretical possibility. The European Union (Withdrawal Agreement) Bill (“WAB”) will now fall on the dissolution of Parliament for the election (see last week's update for a detailed commentary on the WAB), but is expected to return immediately after the election if the Conservatives form the new government. 

There have been communications from various bodies as they adjust legal and regulatory material to take account of the revised exit date (see Documents 2 and 3 below). 

The City minister gave a pre-election speech (see Document 6 below) in which he confirmed that during the recent re-negotiations with the EU, Mr. Johnson's administration had not sought to improve the text of the Political Declaration (“PD”) relating to financial services (“FS”) (on which topic - see our previous updates here and here). He attempts to paint this failure in a positive light, presenting the PD text as a good result for FS. The minister also referred to the Financial Services Bill which had been included in the Queen's Speech (see our commentary in our previous update here) but gave no further information of substance (see the quote at Document 6 below).

Publications:

1. HMT: Equivalence in the area of financial services

John Glen’s letter to the HoC European Scrutiny Committee has been published which states that the UK did not seek any changes to the financial services text in the revised Political Declaration; and confirms that in accordance with the Political Declaration the UK and EU will begin to assess equivalence, as soon as possible after exit, with the aim of concluding these assessments before the end of June 2020. 

2. FCA: Brexit

FCA has published a short statement regarding the Brexit extension which advises that firms do not need to take action to implement Brexit contingency plans for 31 October 2019 and that the date by which firms and funds should notify FCA for entry into the temporary permissions regime has been amended to 30 January 2020. Fund managers will have until 15 January 2020 to inform FCA if they want to make changes to their existing notification.

3. ESMA: Brexit

ESMA has advised that, following the Council’s decision in respect of Article 50, its previous statements relating to its preparations for a no-deal Brexit on 31 October no longer apply, but notes that it will “issue further announcements and updated measures as matters develop.”

4. ECB: Speech by Andrea Enria: The banking union – a personal view on its past, present and future

Text of Andrea Enria’s speech of 30 October 2019 follows in which he discusses aspects of the banking union and Brexit. He comments that both UK and EU banks are “well prepared for the post-Brexit world … As long as regulations in the United Kingdom and the EU fulfil the criteria of equivalence, business between the two areas will remain a significant feature of our financial markets”. He also states that ECB has “worked very well” with PRA and is “strongly committed to doing so in the future”.

5. EC: Article 50

The Council has adopted a decision to extend the period under Article 50.3 to 31 January 2020 to allow more time for the ratification of the withdrawal agreement. The withdrawal can take place earlier on 1 December 2019 or 1 January 2020, if the withdrawal agreement is ratified by both parties.

6. HMT: Speech by John Glen: The UK financial services beyond Brexit

John Glen’s speech of 28 October 2019. Specific topics include: the Financial Services Bill; equivalence assessments. fintech and consumer protection. He states that: ‘The revised Political Declaration is unchanged for financial services. It gives us the basis from which to build a strong and mutually beneficial future relationship…’ and that ‘Both sides remain committed to concluding equivalence assessments by June 2020.’

Other publications from the RegZone Brexit news feed

FCA: Temporary Permissions Regime-Amended Directions

FCA has published revised Directions in respect of AIFMDFSMAUCITSpayments and e-money.

The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No.3) Regulations 2019/1423

The Regulations amend the definition of “exit day” in the European Union (Withdrawal) Act 2018 and come into force immediately after they are made.

HoC/HMT: The Markets in Financial Instruments Exemption Directions 2019

In a written statement to HoC, John Glen explains the background to this (and to the Prospectus Directive and Transparency Directive Equivalence (Variation) Directions 2019, the text of which is currently unavailable). The Direction states that, for the purposes of MiFIR, each of the Central Bank of Norway and the Central Bank of Iceland is a relevant organisation within the meaning of Article 6 of MiFIR and, accordingly, an organisation to which Article 7 of MiFIR applies.

FCA: Speech by Nausicaa Delfas: The future of financial services regulation in the UK

Text of this speech, given on 29 October 2019 follows, in which Nausicaa Delfas considers FCA’s Brexit preparations; its future relationship with European and international regulators and its future approach to regulation. She notes that FCA is working with HMT: “to explore options for enhancing [its] regulatory cooperation with key jurisdictions post-exit, and new mechanisms for market access … [Its] role will be to provide technical support and advice on free trade agreements covering financial services, as well as other mechanisms for enhancing trade and regulatory cooperation”.

ESMA: MiFID data

ESMA is to publish the systematic internaliser and bond market liquidity data on 8 November 2019. It had been due to publish this data by 1 November 2019, but notes that Brexit developments have had an impact on the date. Full details are available here.

PMO: Letter to Donald Tusk

Boris Johnson’s letter of 28 October 2019 to Donald Tusk with regard to the Brexit extension follows.

ECB: Interview with Andrea Enria

This interview with Andrew Enria discusses the Spanish banking sector, including with regard to Brexit.