UK Parliament
Financial services post-Brexit - House of Lords EU Services Sub-Committee publishes letter requesting further clarifications - 20 July 2020
The House of Lords EU Services Sub-Committee has published a letter from Baroness Donaghy (Chair of the Committee) to John Glen MP (Economic Secretary to the Treasury) requesting, among other things, further clarification on the future relationship between the UK and the EU in the field of financial services after Brexit. This follows Mr Glen’s appearance before the Committee on 2 July 2020 in which he gave evidence relating to its inquiry on financial services after Brexit.
The letter requests clarifications on several topics, including the following:
- the timing of any announcements relating to equivalence decisions for the EU. The letter also queries how this process will interact with the government’s equivalence decisions for other third-countries and its forthcoming guidance document on the UK’s equivalence framework;
- the process and approach for ensuring continued future regulatory cooperation between the UK and the EU in financial services; and
- parliamentary scrutiny of the planned consultation on the second phase of the government’s financial services future regulatory framework review.
Letter from Baroness Donaghy (Chair of the House of Lords EU Services Sub-Committee) to John Glen MP (Economic Secretary to the Treasury) requesting further clarifications with regards to the UK-EU future relationship in the area of financial services post-Brexit
Press release
HM Treasury
UK BMR - HM Treasury publishes Policy Statement extending transitional period for third-country benchmarks - July 2020
HM Treasury has published a Policy Statement explaining its decision to extend the transitional period for third-country benchmarks under the the retained EU version of the Benchmarks Regulation (EU) 2016/1011 (BMR), as amended by the Benchmarks (Amendment) (EU Exit) Regulations 2018 (UK BMR), from 31 December 2022 to 31 December 2025. The UK BMR requires that only third-country benchmarks approved for use in accordance with the BMR on the basis on equivalence, recognition or endorsement may benefit from continued market access in the UK after the end of the transitional period.
HM Treasury states that extending the transitional period for third-country benchmarks under the UK BMR will allow UK supervised entities to continue using benchmarks provided by administrators located outside the UK in new financial contracts and instruments without these benchmarks being registered with the FCA until the end of 2025. HM Treasury comments that this prevents the risk of UK firms losing access after the end of 2022 to important benchmarks provided by non-UK administrators who are unable or unwilling to apply for continued market access through the existing third-country regime under the UK BMR.
HM Treasury intends to bring this policy measure forward at the next legislative opportunity and considers that the proposed extension will provide economic and legal certainty for UK financial market participants.
HM Treasury Policy Statement on extending the transitional period for third-country benchmarks under the UK BMR
Webpage
Financial Conduct Authority
Brexit transition period - FCA publishes statement on MoUs with ESMA and EU securities regulators - 17 July 2020
The FCA has published a statement in relation to its memoranda of understanding (MoUs) with the European Securities and Markets Authority (ESMA) and EU securities regulators, agreed on 1 February 2020, covering cooperation and the exchange of information confirming that they remain “relevant and appropriate to ensure continued cooperation and exchange of information”. The MoUs will come into effect at the end of the Brexit transition period.
ESMA has also separately announced that financial market participants whose activity might be affected should have fully implemented their preparatory measures to mitigate any risks stemming from the end of the transition period. ESMA will continue to review its Brexit-related statements, including in relation to operational issues, and will make further communications in due course.
FCA statement confirming MoUs with ESMA and EU securities regulators for after the end of the Brexit transition period
Press release
Electronic Commerce Directive - FCA publishes information on changes and availability of exclusion at the end of the Brexit transition period - 17 July 2020
The FCA has published a new webpage setting out information on changes to the Electronic Commerce Directive (2000/31/EU) (ECD). The ECD excludes e-commerce activities provided from one EEA state to a person in another EEA state from host state regulation. The exclusion is based on reliance by the host state regulator on the regulation of the firm’s home state.
The relevant provisions that transpose the exclusion under the ECD in the UK are: (i) Article 72A of the FSMA 2000 (Regulated Activities) Order 2001; (ii) Article 20B of the FSMA 2000 (Financial Promotion) Order 2005; and (iii) the Electronic Commerce Directive (Financial Services and Markets) Regulations 2002.
Following the end of the transition period, the ECD exclusion will fall away. The FCA advises that UK firms will need to contact local regulators in EEA states to check if there are other ways to provide their services, and then decide on their approach to servicing existing customers in accordance with local law and local regulators’ expectations. The FCA expects firms to provide timely, fair, clear and not-misleading information to their customers.
The FCA also advises EEA-based firms to consider whether they are affected by this change and, if so, address any impact to their business model or marketing before the end of the transition period. EEA-based firms wishing to continue their regulated e-commerce business in the UK will need to consider whether they require UK authorisation. EEA-based firms wishing to wind down e-commerce business that falls within the exclusion will be able to do so under the provisions in Part 4 of the Electronic Commerce and Solvency 2 (Amendment etc) (EU Exit) Regulations 2019.
FCA webpage on information on changes to the Electronic Commerce Directive at the end of the Brexit transition period
International Swaps and Derivatives Association
Brexit FAQs - updated by ISDA - 21 July 2020
The International Swaps and Derivatives Association (ISDA) has updated its Brexit FAQs to reflect the position as at 30 June 2020 with regards to the UK’s position on financial services post-Brexit. The FAQs aim to assist market participants in planning for Brexit and its impact on the provision of cross-border financial services between the UK and the EU, including the impact of Brexit on the OTC derivatives market and ISDA documentation.
Updated ISDA Brexit FAQs
Lloyd’s of London
Part VII transfer - Lloyd’s delays scheme effective date - 23 July 2020
The Society of Lloyd’s (Lloyd’s) has announced that it has decided to delay the scheme effective date of the proposed transfer of its EEA insurance business under Part VII of FSMA 2000 to Lloyd’s Insurance Company S.A. (Lloyd’s Brussels), a subsidiary insurance and reinsurance company incorporated in Belgium. Lloyd’s established Lloyd’s Brussels as part of its Brexit preparations to ensure that EEA policyholders can continue to access the Lloyd’s market and their existing policies can continue to be serviced following the end of the Brexit transition period. After this date, Lloyd’s members would no longer benefit from EU passporting provisions or have permission to underwrite EEA (re)insurance business.
Lloyd’s states that the court hearing to sanction the Part VII transfer is now scheduled to take place on 18 November 2020 and, therefore, the scheme effective date will be delayed from 29 October 2020 to 30 December 2020. The High Court approved Lloyd’s strategy for notifying policyholders about the proposed Part VII transfer in May 2020.
Press release: Lloyd’s delays scheme effective date of its Part VII transfer of its EEA insurance business
City of London Corporation
UK-Australia future financial services relationship - CLC publishes report analysing market access for financial services firms - July 2020
The City of London Corporation (CLC) has published a report on the UK-Australia future financial services relationship post-Brexit. The report identifies policy areas where joint focus, either through free trade agreement (FTA) negotiations or other trade tools such as mutual recognition agreements and regulatory dialogue, could address some common goals.
Among other things, the report assesses the implications for UK-based firms of the recent changes to the Australian licensing regime for foreign financial services providers and analyses the experiences of UK-based firms doing, or seeking to do, business in Australia, in the fields of asset management, banking and payments.
City of London Corporation report on the UK-Australia future financial services relationship post-Brexit
Press release
New Legislation
Draft Greenhouse Gas Emissions Trading Scheme Order 2020 - laid before Parliament - 15 July 2020
The draft Greenhouse Gas Emissions Trading Scheme Order 2020 has been laid before Parliament, together with explanatory information. The draft Order sets out the government’s proposed framework for the UK Emissions Trading Scheme (UK ETS) and its long-term approach to carbon pricing. The UK will stop participating in the EU ETS at the end of the Brexit transition period on 31 December 2020.
Among other things, the draft Order confirms that the government’s preferred policy is to link the UK ETS to the EU ETS, but that this ultimately depends on the negotiations on its future relationship with the EU. The Order covers several key features of the proposed UK ETS, including: (i) scope; (ii) permit and surrendering allowances; (iii) monitoring, reporting and verification; and (iv) enforcement.
The Order will come into force on the day after it is made in order to allow regulators to prepare for the transition from the EU ETS to the UK ETS at the beginning of 2021, with requirements on UK ETS participants taking effect from 1 January 2021.
Draft Greenhouse Gas Emissions Trading Scheme Order 2020
Explanatory memorandum
Please see the Banking and Finance section for an item on HM Treasury’s statement on the applicability of the CRR Amending Regulation (EU) 2020/873 in light of Brexit.
