HM Treasury issued an update on the financial services statutory instruments under the European Union (Withdrawal) Act 2018 and the European Union (Withdrawal Agreement) Act 2020. HM Treasury has been using powers under the European Union (Withdrawal) Act 2018, as amended by the European Union (Withdrawal Agreement) Act 2020, to ensure that UK will have an independent, coherent, and effective financial services regulatory regime at the end of the transition period. This recent statement sets out the approach of Treasury to further secondary legislation that will be brought forward under the European Union (Withdrawal) Act 2018 and the European Union (Withdrawal Agreement) Act 2020. Additionally, on the Brexit preparation webpage, FCA published a guide to preparing for Brexit and updated information for firms transferring their personal data between UK and European Economic Area as part of the preparations for Brexit.
In the previous EU Exit instruments of HM Treasury, there are a number of references to specific dates. In the vast majority of cases, these are references to specific dates within the underlying EU regulations that will be retained at the end of the Transition Period by virtue of the 2018 and 2020 Act; therefore, it would not be appropriate to amend these dates. However, there are some exceptions to this and, in further secondary legislation brought forward by HM Treasury, the following amendments have been made:
- HM Treasury published draft of the amended statutory instrument titled "Securities Financing Transactions, Securitization, and Miscellaneous Amendments (EU Exit) Regulations 2020," along with an explanatory memorandum to the Regulation. This instrument addresses deficiencies across a number of pieces of retained EU law arising as a result of the withdrawal of UK from EU, in line with the approach taken in other financial services EU exit instruments under the European Union (Withdrawal) Act 2018. The amendments are intended to ensure, among others, that the UK firms that are benefitting from an intragroup exemption from the clearing obligation pursuant to the EU derogation on or after December 21, 2020 will also automatically have an exemption in the temporary regime of UK.
- For intragroup exemptions from margin requirements, the EU derogation expired on January 04, 2020 and was never formally extended. Therefore, UK firms, with intragroup transactions with non-EU group entities where no equivalence has been granted, will need to notify FCA for exemptions from the previous EU regime to continue under the temporary regime of UK. FCA will set out further details on the notification process in due course. HM Treasury expects the process to be streamlined to minimize the burden on firms transitioning from EU to UK regime and there is a strong expectation of an identical outcome for all firms impacted by this process.
- Certain cross-references in previous EU Exit instruments will need to be updated. For example, where there are cross-references to EU regulations, as they stood from when a particular EU Exit instruments was made, HM Treasury will, where appropriate, update these references to instead refer to the version of the EU regulation as it forms part of retained EU law. This will ensure that, when HM Treasury’s EU Exit instruments come into force at the end of the transition period, they will not refer to outdated versions of underlying EU regulations.
HM Treasury brought forward secondary legislation under the 2020 Act, to ensure that the temporary permissions and transitional regimes will now apply as intended by reference to the end of the Transition Period. The 2020 Act did not make any general amendment to “exit day” or specific dates that may be referenced within the substantive provisions of EU Exit instruments. As a result, HM Treasury will bring forward further secondary legislation under the 2020 Act to update references to exit day and other dates within the substantive provisions of Financial Services EU Exit instruments, to ensure that they operate as intended from the end of the transition period. This legislation will also shift the application of the temporary transitional power, such that it is available for use by UK regulators for a period of two years from the end of the transition period.
- Draft of Statutory Instrument (PDF)
- Explanatory Memorandum to Draft Instrument (PDF)
- FCA Update on Brexit
Keywords: Europe, UK, Banking, Securities, Brexit, EU Withdrawal Act, Brexit Transition, Securitization, Margin Requirements, FCA, HM Treasury
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