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March 28, 2018

BoE issued an update on the regulatory approach to preparations for the withdrawal of the UK from the EU (Brexit). BoE welcomes the agreement between the UK and EU27 that there should be an implementation period until the end of 2020, as part of the UK’s Withdrawal Agreement with the EU. The agreement is subject to further negotiations between the UK and EU before it is finalized. BoE also published a letter for the preparations of central counterparties (CCPs) and a letter from Sam Woods (CEO of PRA) on Brexit preparations for firms. In addition, FCA published a statement on the EU withdrawal, following the March European Council.

In light of the agreement at the EU Council, BoE considers it reasonable for firms currently carrying on regulated activities in the UK by means of passporting rights, or the EU framework for central counterparties, to plan that they will be able to continue undertaking these activities during the implementation period in much the same way as now. In the letters published, BoE has made clear to relevant firms that they may plan on the assumption that UK authorization or recognition will only be needed by the end of the implementation period. The government has committed to bring forward legislation, if necessary, to create temporary permission regimes to allow relevant firms to continue their activities in the UK for a limited period after withdrawal. In the unlikely event that the Withdrawal Agreement is not ratified, this provides confidence that a back-stop will be available.

Moreover, the Financial Policy Committee (FPC) continues to track a wider checklist of actions that authorities and firms must take to mitigate risks of disruption to financial services. FPC published its most recent quarterly assessment of these actions on March 16. Bank also confirms its approach to the authorization and supervision of international banks, insurers, and CCPs. In the context of their future preparations for Brexit, the European Economic Area banks and insurers may (if they are not conducting material retail business) apply for authorization to operate as a branch in the UK. Non-UK CCPs should continue engaging with BoE on the UK recognition process. The foundation of the BoE's approach to preparations for EU withdrawal remains the presumption that there will continue to be a high degree of supervisory cooperation between the UK and EU. 

 

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Keywords: Europe, UK, Banking, Insurance, Securities, Brexit, Withdrawal Agreement, CCPs, Temporary Permissions Regime, Passporting Regime, FCA, BoE

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