Financial services are a vital component of businesses’ supply chain. Financial institutions have put in place plans to make changes to their business and operations to maintain the continuity of financial services as the UK exits the EU. The CBI has found that other businesses are less aware of the potential implications of these changes to how they will continue to access financial services.
Most businesses are currently focusing on the commercial considerations and the direct impacts of Brexit, including movement of goods across borders. It is important that they are aware of changes that may take place in the financial services sector, so that they understand what this means for how they access financial services in the United Kingdom (UK) and the European Union (EU), and if necessary, can take action to avoid disruption that may arise.
While the Withdrawal Agreement (WA) has been ratified by the EU with the clause of the transition period running from exit date to the end of December 2020, this is yet to be ratified by the UK parliament, and so these FAQs will focus on a “no deal” outcome, where there is no transition period and the terms of access for financial services between the UK and the EU will fall back on World Trade Organisation (WTO) rules.
In the absence of agreement on a formal transition period, HM Treasury (HMT), the Bank of England (BoE) and Financial Conduct Authority (FCA) have set out plans for a temporary permissions and recognition scheme, which will allow EU-authorised firms currently passporting into the UK who wish to continue serving business clients in the UK, to operate in the UK for a limited period after withdrawal while they seek authorisation or recognition from UK regulators. Alongside the temporary permissions regime, the Government has created further legislation, to ensure existing contractual obligations not covered by the temporary permissions regime can continue to be met. The Government has enacted legislation for the financial services contracts regime (FSCR) which will provide a limited period of time during which EEA passporting firms can continue to service UK contracts entered into prior to exit, in order to wind down their UK business in an orderly fashion.
The CBI, working closely with Association of Corporate Treasurers (ACT), have developed a set of key issues and questions that corporate treasurers and those with risk management responsibilities may find helpful to consider in the context of Brexit. We are compiling responses to these questions having consulted members from the FS sector, UK regulators, financial services trade associations and other stakeholder groups with the aim of providing a set of FAQs to inform businesses. This will provide general advice to firms and will not constitute legal advice.