FCA and minister speak with optimism about the post-Brexit financial world

Assuming that it does eventually happen at some stage, the UK’s exit from the EU will certainly bring with it some major changes in the economy and in the way some financial services firms do business. However, Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority (FCA), and John Glen, a Treasury minister, have both recently given speeches expressing optimism about the economic outlook.

Addressing the UK Financial Services Industry Beyond Brexit Summit, Ms Delfas said that the Financial Policy Committee, which is independent of the Government, has concluded that the UK financial system is adequately prepared for a disorderly Brexit. Although the House of Commons indicated that it accepted the new UK/EU Withdrawal Agreement in principle last month, the agreement still needs to be approved formally by both Houses of Parliament when they re-convene after the forthcoming General Election. A no-deal Brexit remains possible as it is the legal default position if any withdrawal agreement cannot be ratified.

The FCA director then mentioned some of the measures the FCA has taken to minimise Brexit disruption, which include:

  • The Temporary Permissions Regime will allow European firms that currently operate in the UK using the ‘passporting’ system to continue to do so for a limited time after Brexit, before they needed to apply for full FCA authorisation. Some EU member states, but not all, have reciprocal agreements for UK firms who operate in the EU
  • The FCA has agreed Memoranda of Understanding with all European Supervisory Authorities and Member States, as well as with countries across the globe
  • The Temporary Transitional Power, which the FCA will use in the event of a no-deal exit, allows the regulator to delay or phase in changes to regulatory requirements made under the EU (Withdrawal) Act 2018 so firms can generally continue to comply with their regulatory obligations as they did prior to Brexit. The power has so far been extended to December 31 2020

Ms Delfas also remarked that, on exit day, the FCA’s rules will be much the same as they are now, and that these rules will be closely aligned with those that apply in the EU. After Brexit, the FCA will continue to work with European regulators, so it may well be the case that UK and EU rules remain closely aligned.

The Economic Secretary to the Treasury, John Glen MP, spoke at the same event, and also highlighted the extent to which the UK and EU will continue to co-operate regarding financial services legislation.

Here, Mr Glen commented:

“A deep and comprehensive relationship with the EU in financial services will help us [maintain the strength of UK financial services]. It will preserve cross-border market access in key areas, but also give us the freedom to set our own rules to enable the sector to thrive, while ensuring continued financial stability in the UK and the rest of Europe.”

He added that the text of the Political Declaration, which accompanies the UK Government’s Withdrawal Agreement, ensures close cooperation on regulatory and supervisory matters.

Ms Delfas’s speech mentioned that the FCA “may have some flexibility around EU rules we have onshored, particularly where experience shows them not to be working efficiently or effectively.” However, her comments about the way European regulators will continue to work together means that any firm expecting a significant decrease in their regulatory burden after Brexit is likely to be disappointed.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article