Brexit news for financial services firms -from 17 August 2019 to 2 September 2019

05 September 2019

1.   BoE:The impact of Brexit on UK firms

This BoE staff working paper assesses the impact of Brexit on UK firms with regard to levels of uncertainty, investment and productivity.

2.       Department for Exiting the EU: Speech by Steve Barclay

Text of Steve Barclay’s speech of 28 August 2019 follows. He highlights the close relationship between France the UK. He says, ‘Our shared economic future is best served through a deal as the UK leaves the European Union’  He goes to explain the government’s commitment to the removal of the backstop, stating that ‘will not allow the people of Northern Ireland to be subject to an indefinite period of continued alignment.’

3.       HMT: Brexit preparations for businesses

HMT reports that HMRC is to allocate VAT registered companies across the UK an Economic Operator Registration and Identification (EORI) number in the next two weeks in order to keep trading with customers and suppliers in the EU post-Brexit.

4.       The European Union (Withdrawal) Act 2018 (Commencement No. 4) Regulations 2019/1198 (C39)

These Regulations are the fourth set of commencement regulations made under the European Union (Withdrawal) Act 2018. Regulation 2 brings section 1 of that Act into force on the day after the day on which these Regulations are made. Section 1 provides that the European Communities Act 1972 (c. 68) is repealed on exit day. More detail is available here.

5.     The Alternative Arrangements Commission: Ammend Political Declaration

The Alternative Arrangements Commission is a cross-party Commission, set up and run by Prosperity UK. They describe their function as: ‘an attempt to find a solution to this problem, (the Irish Border) and thus make possible a Brexit deal, firstly by identifying a range of Alternative Arrangements to the Northern Irish Backstop and secondly by drafting Protocols which describe how these Alternative Arrangements could be implemented.’ The Commission released their flagship document in July 2019.

The Commission published three documents on the 2 September: an amended Political Declaration, proposed changes to the Withdrawal Agreement and a guide to those proposed changes to the Withdrawal Agreement.

The guide explains Prosperity UK’s interpretation of what the governments aims are:

‘The new government’s goal is “as frictionless trade as possible”. The PD and WA have therefore been amended to accord with the government’s new position  which is that the end state for the UK and EU is a comprehensive FTA in both goods and services, allowing  the UK capacity to diverge regulations, but with as much regulatory cooperation and deemed equivalence as possible.

The idea of the PD and WA is to set up the negotiation of an FTA; If both sides are agreed on this, then the single customs territory language in the current Withdrawal Agreement is unnecessary. It also fully allows the execution of UK independent trade and regulatory policy, including a fast-tracked FTA with the US, CPTPP accession and deals with Australia and New Zealand, key planks of the UK’s independent trade policy.  Hence, the PD has been amended so the FTA negotiations do not build on the provisions of the backstop, but rather involve negotiations between two customs territories…

How will the UK protect itself in the Transition Period?

The major risk associated with the transition period is of the EU passing (possibly deliberately) damaging legislation without the UK having a voice. There are concerns in the area of financial services and even some goods regulation where the EU may seek to lock the UK into practices which will limit its range of movement in international trade negotiations and in terms of its own domestic regulatory improvements. In order to prevent this, we have spelled out the need for a commitment to Good Regulatory Practice during the transition period, with the possibility of dispute settlement... We discuss this in greater detail in the Political Declaration but include a provision in the WA that requires the EU to consult the UK in the event that it promulgates regulation that could damage the UK. We also allow the UK to have the right to be consulted on any regulatory changes in the EU that would implicate the UK…

Level Playing Field (“LPF”) Obligations.

Our objective is that the backstop is never triggered, and hence the LPF obligations in the backstop are not relevant. However, it is legitimate for the EU to suggest that some form of discipline should apply to the UK in the event of a tariff free, quota free gold standard FTA such as the one proposed. Hence, we provide in the PD the specificity of what LPF obligations would look like in an FTA. These are the kinds of provisions in the area of labour, environment, competition and state aids which would could be in an advanced FTA.’

Changes of note in the amended Political Declaration include, ( items in bold are additions made by the Commission):

’36. While preserving regulatory autonomy, the arrangements should include provisions to promote regulatory approaches that are transparent, efficient, compatible to the extent possible, and which promote avoidance of unnecessary regulatory requirements. Good Regulatory Practices that are efficient, transparent and are the least damaging to trade and market competition with respect to the UK and the EU consistent with a clearly stated, legitimate public policy goal. ‘ 

40. The Parties should agree, in line with WTO rules, the greatest possible degree of regulatory recognition and deemed equivalence between their regulatory systems, taking full account of the fact that their regulatory systems will be identical on day one of Brexit. The Parties shall agree a mechanism to manage divergence as it occurs so that neither Party can remove regulatory recognition or a deemed equivalence finding without good reasons. 

41. The Parties shall consider whether the diverging party has satisfied Good Regulatory Practice, whether it maintains the same regulatory goals and whether these goals are objectively achieved by the diverging party in deciding whether to remove recognition. 

42. The decision to remove recognition shall be subject to a binding dispute settlement mechanism…

44. Noting that both Parties will have equivalence frameworks in place that allow them to declare a third country's regulatory and supervisory regimes equivalent for relevant purposes, the Parties should start assessing equivalence with respect to each other under these frameworks as soon as possible after the United Kingdom’s withdrawal from the Union, endeavouring using their best endeavours to conclude these assessments before the end of June 2020. The Parties will keep their respective equivalence frameworks under review, and will be guided by similar principles as set out in the horizontal regulatory section above.  Given the nature of financial services, the Parties will agree an appropriate specific dispute settlement mechanism meeting the needs of the financial services sector.’

The Commission have made significant changes to section 14 of the Political Declaration titled Level Playing Field for Open and Fair Competition. They have added articles 87-132. These paragraphs address: Taxation, Labour Standards, Environmental Standards, State Aid, Competition Rules, State-Owned Undertakings and Dispute Settlement.

Other publications from the RegZone Brexit news feed

EPC: Operational implications of a no-deal Brexit on SCT and SDD transactions

This press release sets out information with regard to SEPA credit transfer, instant credit transfer, direct debit and business to business transfers in the event of a no-deal Brexit.

BoE: Speech by Mark Carney: The Growing Challenges for monetary policy in the current international monetary and financial system

Mark Carney’s speech of 23 August 2019 follows. Topics include: payment services and Brexit.

ECB: Resolution on Banking Union Annual Report feedback

ECB has published its response to feedback provided by the European Parliament in relation to the report (published in January 2019. Topics include: Brexit risks; non-performing loans; money laundering; stress tests; resolution and ECB's supervisory role.

PMO Call with Jean-Claude Juncker

This press release sets out a short note of a call between Boris Johnson and Jean-Claude Juncker of 27 August 2019.

ECB: Interviews with Andrea Enria

ECB has published two interviews with Andrea Enria. Topics discussed include Brexit, culture, money laundering and banking regulation. The second interview can be accessed here.

BoE: The Brexit vote, productivity growth and macroeconomic adjustments in the United Kingdom

This research paper from the MPC has been published.

Department for Exiting the EU: UK EU Commissioner

The UK’s Permanent Representative to the EU has written to the EU to confirm that the UK will not be nominating a candidate for the 2019-2024 College of Commissioners.

HoC: UK progress in rolling over EU trade agreements

This updated HoC Library briefing paper provides a list of EU trade agreements in force and the Government's progress in rolling them over.

Department for Exiting the EU: UK attendance at EU meetings

The Government has decided this week that from 1 September, UK officials and Ministers will now only attend EU meetings where the UK has a significant national interest in the outcome of discussions. The UK will continue to attend if and when it is in its interests, with particular regard to meetings on UK exit, sovereignty, international relations, security, or finance and the Prime Minister will attend the European Council.  The Government explains its position in the following press release.
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Agency Database

Future Dates

* Estimated date

  • *31 October 2019

    Exit date is:

    •  31 October 2019 The UK will withdraw from the EU

  • 31 December 2019

    Following PRA's policy statement (PS10/17) - operational continuity firms are expected to submit the template (PRA109) 45 business days after the first reporting period ending 31 December.

  • 31 December 2019

    End of the five-year transitional period under which UCITS will not require a (PRIIPs-style) KID in addition to a UCITS KIID (i.e. five years after the PRIIPs Regulation comes into force)