EBA issued a statement clarifying the previous EBA statements regarding Brexit for the benefit of consumers across EU. UK had left EU on January 31, 2020 and the Brexit transition period ends on December 31, 2020, which means that EU law will cease to apply in UK as of January 01, 2021; thus, from this date, UK financial institutions not holding a valid authorization from the supervisory authorities in EU will lose the right to provide financial services in the EU. The statement provides clarifications about preparations needed by financial institutions, changes in cross-border payments between EU and UK, and access to bank accounts in UK. EBA has been calling on all financial institutions affected by Brexit to adequately and timely inform consumers regarding the availability and continuity of the services they currently provide, including whether institutions plan to cease offering services to consumers in EU.
In the statement, EBA clarifies that, to continue to provide financial services in EU, UK financial institutions will need to ensure that they offer these services through entities that are duly authorized in EU. Based on the assessment of the supervisory authorities in EU, most of the UK financial institutions that are actively planning to continue to offer services in EU have obtained adequate authorizations for their EU-based activities and are in the process of “ramping up” their EU operations. This includes ensuring that those entities have adequate staff, management, and risk management capabilities and that they move EU customers and their contracts into their EU entities, where relevant. In situations where the authorization process would not be finalized before the end of the transition period, supervisory authorities in EU have requested institutions to implement contingency plans setting out alternative actions until they receive authorizations. Where the UK financial institutions have chosen to cease their activities in EU, they are required to finish off-boarding of the affected customers by the end of the transition period without causing detriment to consumers.
Under the EU law, after the end of the transition period, consumers in EU may maintain their existing bank accounts held with the financial institutions in UK, subject to the relevant UK legal requirements. However, consumers need to consider the following:
- If a bank account is held with a UK financial institution authorized in UK, the deposit protection rules applicable in the UK will apply and these may be different to those applicable to bank accounts held in the EU.
- If a bank account is held with an EU-based branch of a UK financial institution, it will no longer be covered by the UK deposit guarantee scheme. Consumers are advised to check with their financial institution (branch) or national supervisory authorities in their member state whether such deposits will be protected by the deposit protection scheme in the relevant member state.
- If a bank account is held with a UK-based branch of an EU-authorized institution, it will be covered by the UK deposit scheme; however, this could change after the end of transition period and such deposits may or may not be protected by the UK or a national deposit protection scheme in EU.
Related Link: Statement
Keywords: Europe, EU, UK, Banking, Insurance, Securities, Brexit, Brexit Transition, Deposit Guarantee Scheme, Cross-Border Cooperation, EBA
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