FCA, BoE and PRA Get New Powers for Hard Brexit

UK financial regulators will have extra powers if a deal with the European Union doesn’t materialize

While the Brexit debate keeps raging on, both sides of the English Channel are accelerating preparations for a no-deal Brexit. The latest sign comes from the UK Treasury which published draft legislation enabling the FCA, the Bank of England, and the PRA to make transitional provisions in case the UK leaves the EU without an agreement.

The intention of the UK authorities is to ensure that regulated firms won’t need to explicitly prepare to meet the changes to their UK regulatory obligations associated with Brexit.

The move also aims to clarify in which areas where regulators won’t provide a transitional provision. The move provides some much-needed certainty for companies that are getting increasingly anxious about how to approach a no-deal Brexit.

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With the specifications which the three UK financial regulators are set to provide, they expect firms and other regulated persons to begin their preparations now in order to comply with the post-exit regulatory obligations.

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Temporary Relief

While the regulators are prepared to provide temporary relief in some areas, they are also identifying some areas where such an approach wouldn’t be possible.

“In these areas only, we expect firms and other regulated persons to begin preparing to comply with changed obligations now,” the FCA’s statement on the matter reads.

The regulator is mandating all companies that are subject to the MiFID II transaction reporting regime, connected persons (for example approved reporting mechanisms), and firms that are reporting under EMIR, to review a list of rules.

Another point made by the FCA is that existing transitional arrangements will operate from exit day. Firms and other regulated persons wishing to use these regimes should ensure they have completed the necessary steps by exit day to enter the relevant regime. This may include submitting a notification to the regulators.

Affected Business Aspects

The FCA urges companies to prepare in the following areas: MiFID II and EMIR transaction reporting, issuer rules, contractual recognition of bail-in, short selling notifications, securitization, and the use of credit ratings for regulatory purposes.

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