February 28, 2019

BoE published a package of materials updating firms on its regulatory and supervisory approach in relation to the withdrawal of UK from EU. The package builds on previous engagement with firms on their preparations around EU withdrawal and acts as a contingency for a scenario in which the implementation period, which has been agreed in principle as part of the UK’s Withdrawal Agreement with the EU, does not take effect on March 29, 2019. The package contains a policy statement (PS5/19) and three supervisory statements—SS1/19, SS2/19, and SS18/15.

PS5/19 sets out the BoE feedback to responses received on the proposed approach to the use of the transitional power. SS1/19 elaborates on how firms should interpret the existing non-binding PRA regulatory and supervisory materials in light of the UK’s exit from the EU. This includes the PRA’s existing approach documents, statements of policy, and supervisory statement—these are collectively referred to as the non-binding materials of PRA. SS2/19 sets out the approach PRA expects firms to take when interpreting the EU-based references found in reporting and disclosure requirements and regulatory transactions forms after the UK’s withdrawal from EU. SS18/15 sets out the expectations of PRA from deposit-takers with regard to the depositor protection rules. 

The BoE package of communication does three things:

  • First, it confirms intention to provide firms with broad transitional relief with respect to changes to their regulatory obligations in the event that UK withdraws from EU in March 2019, without an implementation period. Position remains to use the transitional power in such a way that in all but certain limited exceptions UK-regulated firms do not generally need to take action now to implement changes in UK law arising from the UK’s withdrawal by March 2019. BoE published draft directions that will implement transitional relief for a period of 15 months from the exit day, subject to limited exceptions. This is in line with the approach taken by FCA. BoE also published detailed guidance for firms on how this transitional relief will apply. 
  • Second, it confirms the approach to changes to rules and Binding Technical Standards (BTS) as a result of the withdrawal from EU. In doing so, it sets out changes to obligations on firms that will apply once the transitional relief falls away. BoE published the rule and BTS instruments in a near-final form.
  • Third, it sets out the roles and responsibilities BoE will be taking on in March 2019 if UK leaves  EU without an implementation period. The transferred responsibilities—which include, for example, the production of Solvency II technical information—would take effect on exit day.

BoE and PRA will communicate if and when the policy materials, including the directions that give effect to the temporary transitional power, and all rules and BTS Instruments, are made final and formally set to enter into force on the Exit Day.

 

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Keywords: Europe, EU, Banking, Insurance, Securities, Brexit, EU Withdrawal, Regulatory and Supervisory Approach, FCA, PRA, BOE

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