Government Sets Out Initial No Deal Approach For Financial Services

Published / Last Updated on 22/08/2018

The Government has today published a series of technical guides on how different industries will be treated if there is a ‘no deal’ Brexit.  Initially, the government has said that it will, as part of the European Union (Withdrawal) Act 2018, basically mirror EU laws to ensure a smooth and basic switch over the day after Brexit with EU standards being maintained, complied with and EU certification e.g. medicines certified safe for public use in the EU, being accepted in the UK.

Financial Services

In the Governments guide “UK government's preparations for a 'no deal' scenario” published today, they have set out their approach to bringing EU financial services legislation into domestic law in time for a March 2019 exit.

However, the initial guidance suggests that the “approach of continuity does not mean that everything will stay the same, but the priority is maximising stability at the point of departure through the government’s action.”

It suggests that the financial services framework will need to be adjusted to reflect the fact that the “UK will no longer be inside the EU’s framework for financial services. In order to ensure that we are prepared for a ‘no deal’ scenario, the UK government’s approach to financial services will, in general, be to treat EEA states largely as we currently treat other third countries.”   This is broadly in line with the fact that the EU’s withdrawal plans also state that the EU will treat the UK as a ‘third country’.

In addition, today’s guide suggests that things will change for example where a different approach is necessary to manage the transition to a stand-alone UK regime such as financial services.  New legislation will be brought in for a ‘Temporary Permissions Regime’ to allow EU firms and funds passporting into the UK to continue providing services in the UK for a temporary period after exit.

Unilateral not Reciprocal

The Brexit Secretary Dominic Raab has committed the UK to unilateral action to ensure EU firms passporting in and offering services in the UK for up to a 3 year temporary window but this does not mean that the EU will reciprocate.  Worst case scenario, as it says in the guide:  “In the absence of action from the EU, EEA-based customers of UK firms currently passporting into the EEA, including UK citizens living in the EEA, may lose the ability to access existing lending and deposit services, insurance contracts (such as life insurance contracts and annuities) due to UK firms losing their rights to passport into the EEA.” 

We sincerely hope the EU will reciprocate to ensure a smooth transition for EU nationals and companies operating in the UK and for UK Nationals and companies operating in the EU.

Read the full guide for “Banking, insurance and other financial services if there’s no Brexit deal”  https://www.gov.uk/government/publications/banking-insurance-and-other-financial-services-if-theres-no-brexit-deal/banking-insurance-and-other-financial-services-if-theres-no-brexit-deal

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