Featured Product

    FCA Publishes Report on EU Withdrawal Impact Assessment

    November 29, 2018

    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

    Related Articles
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Publishes Risk Dashboard for Third Quarter of 2020

    EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro

    ECB concluded the public consultation on the introduction of a digital euro in EU.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Finalizes Guide on Supervisory Approach to Bank Consolidation

    ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.

    January 12, 2021 WebPage Regulatory News
    News

    SRB Chair Outlines Work Priorities for 2021

    The SRB Chair Elke König published an article setting out work priorities for 2021.

    January 11, 2021 WebPage Regulatory News
    News

    FDIC Selects Companies to Compete in Final Phase of Tech Sprint

    FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.

    January 11, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6417