UK Government publishes ‘no deal’ guidance for financial sector

The paper was unexpectedly slated as one of about 20 “no-deal” papers to be published in the lead up to Brexit, covering subjects as diverse as nuclear research, farm payments and state aid.

The information released today states:

The European Union (Withdrawal) Act 2018 transfers EU law, including that relating to Financial Services, to the UK statute book on exit day. It also gives Ministers powers to amend the law to ensure that there is a fully functioning financial services regulatory framework at the point of exit.

When the UK leaves the EU, it will be outside of the EU’s framework for financial services regulation. 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 (countries outside of the EEA) at that time.

The UK will also, in general, default to treating EEA states and EEA firms largely as it does other third countries and their firms. However, the government has confirmed that there will be instances where we diverge from this approach in order to ensure that a functioning legislative regime is in place, to minimise disruption and avoid material unintended consequences for the continuity of financial services provision, to protect the existing rights of UK consumers, or to ensure financial stability.

Responding to Westminster’s contingency paper, Liz Cameron, Director and Chief Executive of Scottish Chambers of Commerce, said: “The technical notice on financial services outlines a commitment to ensuring a temporary passporting arrangement for EEA firms, allowing them to continue to operate financial services in the UK while they seek full authorisation from UK regulators.

“While the UK Government is acting to provide some clarity of direction for EEA firms based in the UK, UK firms currently passporting into the EEA, and their customers, continue to face uncertainty. The impact of this highlights the need for a constructive deal to be reached, but continued uncertainty around this area has already caused several firms to press ahead with contingency plans, by opening additional subsidiaries or moving staff.

“The notice also outlines some of the challenges that UK businesses and consumers will face in light of a no deal, with the potential of more expensive, slower processing for Euro transactions, increased costs for card payments, and surcharges on transactions. Outcomes such as this, which diminish the competitiveness of UK firms and the spending power of our consumers, must be avoided.”