EBA Urges Firms to Finalize Preparations for End of Brexit Transition

Finalization of preparations and authorizations with relevant competent authorities in EU

To continue to provide services in EU, relevant UK-based financial institutions need to ensure that they have appropriate authorizations from EU competent authorities, including for their existing branches operating in EU, and fully establish those operations. Financial institutions should ensure that associated management capacity, including appropriate technical risk management capabilities, is effectively in place ahead of time. Moreover, financial institutions should not outsource activities to such an extent that they operate as "empty shell" companies, but are expected to increase their EU footprint, including their local resources in proportion to the amount of business being conducted in and from EU. Financial institutions should focus on areas where further action stills needs to be taken—namely, changing and moving contracts and clients, systemic exposures to UK-based financial market infrastructures, and access to funding markets, including possible related capital impact. Institutions should also take necessary actions to address impact on rights and obligations of their existing contracts, specifically the derivative contracts. In their preparations for the end of the transition period and ramping up their EU operations, financial institutions should duly comply with all applicable EU legislation and pay attention to prudential, consumer protection, and anti-money laundering and countering financing of terrorism (AML/CFT) requirements.

Preparations by payment and electronic money institutions

Contingency plans remain especially relevant for payment and electronic money institutions, where many services in EU have been provided by the UK-based institutions on a cross-border basis benefiting from the EU passporting arrangements. UK-authorized payment and electronic money institutions that wish to continue to offer services to EU-based customers, after December 31, 2020, need to be adequately authorized beforehand by an EU competent authority. As a condition of authorization, relevant UK-based payment and electronic money institutions are required to submit application documents that are compliant with the EBA guidelines on authorization and registration under the revised Payment Services Directive (PSD2). Furthermore, account information service providers and payment initiation service providers registered or authorized in the UK will no longer be entitled to access customers’ payment accounts held at the EU payment service providers and their PSD2 eIDAS certificates under Article 34 of the Commission Delegated Regulation 2018/389 will be revoked.

Communication to customers

Financial institutions affected by the withdrawal of UK from EU should provide adequate information to their customers in EU regarding the availability of services after the end of the transition period. Institutions ceasing their activity should inform the EU-based customers in due time (before the cessation) about the effect of cessation on the provision of services and the way to exercise their rights, to avoid any detrimental effects for clients. If EU-based customers have concerns about whether they may be impacted by the withdrawal of UK from EU and they have not been contacted by their financial service providers until now, the customers have the right to contact financial institutions and their respective competent authorities directly. 

Related Links

• EBA Press Release
• EC Notice (PDF)

Keywords: Europe, EU, UK, Banking, Brexit, Transition Period, Passporting, Contingency Plans, Authorization Applications, PSD2, EC, EBA