UK Government issues Brexit papers and guidance on ‘no deal’ planning

The UK Government has released an overview paper and over 20 sector specific guidance notices on how businesses and individuals should prepare for a `no deal’ Brexit.

The overview paper

The overview paper includes the measures which deal with a `no deal` scenario. Additionally, it also includes the guidance notices which “set out information to allow citizens and businesses to understand what they would need to do in a `no deal’ scenario, so that they can make informed plans and preparations”.

Also, the overview paper states that the UK Government is prepared to act unilaterally in order to provide continuity for a temporary period in a `no deal` scenario in order to minimise disruption to UK businesses and citizens, irrespective of whether the EU reciprocates. Regarding the financial services network, there will be temporary permissions regimes which will allow firms and funds passporting into the UK to continue providing services in the UK for a limited period after exit day.

The EU’s approach is also covered in the overview paper. There are a number of Brexit preparedness notices which has been published by the European Commission. The Commission has stated that in a `no deal` scenario the EU “would intend to treat the UK as a third country for all purposes”.

Guidance notice on financial services

The main points of the guidance notice on banking, insurance and other financial services if there is not Brexit deal include:

  • In a `no deal` scenario, UK firms` position in relation to the EU would be determined by the relevant Member State rules and any applicable EU rules that apply to third countries at that time.
  • Generally, the UK will default to treating EEA firms and EEA Member States as it does to other firms from third countries. For instance, by introducing the temporary permission regime, the UK Government will diverge from this approach to maintain UK financial stability.
  • Additionally, EEA electronic money and payment institutions, EEA funds that are marketed in the UK will benefit from similar regime.
  • Whilst the UK Government has already released draft legislation that will establish a temporary permissions regime for central counterparties (CCPs), it will further deliver legislation for transitional arrangements for credit rating agencies, trade repositories, central securities depositories, data reporting service providers, depositories of authorised funds and systems under the Settlement Finality Directive and depositories of authorised funds.
  • In order to ensure that contractual obligations between UK-based customers and EEA firms that are not covered by the regime can continue to be met, the UK Government will bring forward legislation.
  • Financial services firms should communicate with their customers at an appropriate time if the customers need to take action:
    • If the customer is based in the UK and accessing services in the UK provided entirely by UK-based providers, the changes due to Brexit are unlikely. However, a firm should communicate to customers if they are affected by the firm’s Brexit planning.
    • Some EEA-based firms which provide retail banking or deposit taking services in the UK through a subsidiary which is authorised in the UK will not be affected as a result of Brexit.
    • The UK Government is looking to align UK domestic payments legislation to maximise the likelihood of remaining a member of the Single Euro Payments Area as a third country.
    • It is likely that the cost of card payments between the UK and the EU will rise, and the surcharging ban will no longer cover cross-border payments.
    • The temporary permission regimes will allow EEA firms currently passporting into the UK to continue providing financial services to UK customers for up to three years after Brexit.
    • In case of no action from the EU, EEA-based customers of UK firms which are currently passporting into the EEA, may lose the ability to access existing deposit and lending services due to UK firms losing their passporting rights. EEA clients will no longer able to use the services of UK-based investment banks, and UK-based investment banks may be unable to service existing cross-border contracts. However, the UK Government will take unilateral action in order to provide continuity
      for a temporary period.
  •  Regarding funds and managers authorised under EU legislation, the UK Government explains that there are a number of requirements for cooperation between supervisory authorities in the relevant EU Member State and the non-EU country concerned. The UK Government is ready to agree
    cooperation arrangements with their EU counterparts as soon as possible, which is a technical
    exercise to bring the UK into line with other third countries.
  • There are number of messages in regard to financial market infrastructure (FMI):
    • For UK-based users of non-UK CCPs the UK Government is providing for a temporary permissions
      regime that will enable non-UK CCPs to continue to provide services to the UK for a period of up
      to three years.
    • There will be no need for UK-based clearing members using UK CCPs to take any action because of
    • There will be no change for customers settling UK securities at the UK’s Central Securities
      Depository (CSD). EU securities may no longer be able to be directly settled in the UK, if no further
      action is taken by the EU.
    • The UK Government is bringing forward transitional provisions allowing UK customers of non-UK
      CSD’s to continue providing services to the UK until recognition and equivalence decisions are
    • The designation in respect to UK insolvency will continue for FMIs designated at the time of Brexit under the UK Settlement Finality Regulations (SFR).
    • The UK Government will bring forward legislation to continue protections granted by the SFR allowing designations of FMIs that are outside the UK. This legislation will also provide for a temporary regime that will allow certain non-UK FMIs to continue to benefit from UK protections currently provided by the EU Settlement Finality Directive.
    • If there is no action to designate UK FMIs, EU settlement finality protection for UK FMIs will cease. This will mean that EU customers will present higher risks to these FMIs and may no longer be able to access their services.

Further information:

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