FCA Publishes Report on EU Withdrawal Impact Assessment
FCA published a report on impact assessment of the withdrawal of UK from EU. The report sets out the impact of the Withdrawal Agreement and future framework on the objectives of FCA, as requested by the Treasury Select Committee. FCA also published a letter from Andrew Bailey, its Chief Executive, written to Rt Hon Nicky Morgan MP, Chair of the Treasury Select Committee. The letter highlights the key points related to the impact assessment.
In line with the Treasury Select Committee’s request, FCA focused its analysis on the following three areas:
- No Withdrawal Agreement is finalized by March 29, 2019 or no future relationship is in place at the end of the implementation period
- The draft Withdrawal Agreement is agreed
- The future relationship is in place by December 31, 2020
The report states that impact of a no-deal scenario greatly depends on the extent to which UK and EU can continue to cooperate and take action together to minimize disruption. The government, FCA, and BoE/PRA have taken steps to ensure that appropriate mitigation is in place for risks that can be dealt with unilaterally. Alternatively, in the event a Withdrawal Agreement is ratified but no future relationship is in place before the end of 2020, and absent any other agreement for financial services, or an extension of the implementation period, UK would leave EU with no specific framework in place governing its relationship the EU. FCA expects, in this scenario, firms would have had more time to prepare for such an outcome; therefore, the risks specifically for the financial sector would be lower than had UK left without an agreement in March 2019. However, some of the cliff-edge risks are dependent on actions taken by the EU. While UK and EU may have had more time to coordinate their approaches to dealing with such risks, it is not possible to rule out that at the end of the implementation period new cliff-edge risks could arise.
The draft Withdrawal Agreement provides for an implementation period, which will run from March 30, 2019 to December 31, 2020, during which EU law applies to UK. The implementation period may be extended once with both parties’ mutual consent. FCA has consistently supported an implementation period to avoid cliff-edge risks and smooth UK’s transition to a new relationship with EU. The draft Withdrawal Agreement achieves this by ensuring that EU law, and rights and obligations derived from EU law, continue to apply throughout the period. This includes new EU laws that are agreed and implemented during that period. For FCA, the risks presented in an implementation period are preferable to the risks of a no-deal scenario. As the implementation period is extendable for up to two years by agreement between UK and EU, this could assist in helping to avoid further cliff-edge risks at the end of the period. However, it will be important to consider the risks associated with any extension and to work during the period to avoid new cliff-edge risks arising.
At the end of the implementation period, UK and EU are expected to have an agreed future trading relationship in place. The government and EU have agreed an outline of the political declaration, setting out the framework for the future relationship between EU and UK. The UK and EU will both have the ability and common interest to find each other’s regimes equivalent post exit, facilitating market access across a range of sectors. The declaration appropriately recognizes that this must be in the context of both sides retaining autonomy over the exercise of their equivalence regimes. Therefore, equivalence assessments will need to be based on equivalence of outcomes, as opposed to identical rulebooks. FCA believes that there is a substantial scope for development and improvement of the framework.
Related Links
Keywords: Europe, EU, UK, Banking, Insurance, Securities, Brexit, EU Withdrawal Impact Assessment, Withdrawal Agreement, BoE, PRA, FCA
Previous Article
FED Consults on Rule Establishing Risk-Based Categories for BanksRelated Articles
|
News
US Agencies Adopt Rule to Exclude Community Banks from Volcker RuleUS Agencies (CFTC, FDIC, FED, OCC, and SEC) adopted a final rule to exclude community banks from the Volcker Rule, in line with amendments to certain sections of the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.
July 22, 2019
WebPage
Regulatory News
|
|
News
US Agencies Adopt Amendments to Simplify Regulatory Capital RulesUS Agencies (FDIC, FED, and OCC) adopted a final rule that reduces regulatory burden by simplifying several requirements in the regulatory capital rules for banks.
July 22, 2019
WebPage
Regulatory News
|
|
News
IA of Hong Kong Delegates Inspection and Investigation Powers to HKMAHKMA and IA of Hong Kong jointly issued a statement announcing the delegation of the inspection and investigation powers of IA to HKMA, pursuant to the statutory regulatory regime for insurance intermediaries under the Insurance Ordinance.
July 19, 2019
WebPage
Regulatory News
|
|
News
FSB Extends Implementation Timeline for Policy Recommendations on SFTsFSB announced adjustments to the implementation timelines for its recommendations on securities financing transactions (SFTs), specifically those related to the minimum haircut standards for non-centrally cleared SFTs.
July 19, 2019
WebPage
Regulatory News
|
|
News
EBA Single Rulebook Q&A: Third Update for July 2019EBA published answers to six questions under the Single Rulebook question and answer (Q&A) tool this week.
July 19, 2019
WebPage
Regulatory News
|
|
News
EBA Report Assesses Regulatory Framework for Fintech ActivitiesEBA published the findings of its analysis on the regulatory framework applicable to fintech firms when accessing the market.
July 18, 2019
WebPage
Regulatory News
|
|
News
OSFI Revises Capital Requirements for Operational Risk for BanksOSFI is revising its capital requirements for operational risk, in line with the final Basel III revisions published by BCBS in December 2017.
July 18, 2019
WebPage
Regulatory News
|
|
News
OSFI Consults on Revised Principles for Management of Liquidity RiskOSFI proposed revisions to Guideline B-6 on the principles for the management of liquidity risk.
July 18, 2019
WebPage
Regulatory News
|
|
News
ESMA Guidance on Disclosures for Credit Rating Sustainability IssuesESMA published the technical advice on sustainability considerations in the credit rating market, along with the final guidelines on disclosure requirements applicable to credit ratings.
July 18, 2019
WebPage
Regulatory News
|
|
News
FASB Issues Q&A on Estimation of Expected Credit Losses by FirmsFASB issued a second question-and-answer (Q&A) document that addresses more than a dozen frequently asked questions related to the Accounting Standards Update No. 2016-13 titled “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”
July 17, 2019
WebPage
Regulatory News
|
