1. Brexit
Deal or No Deal

2. No Deal – Passporting into UK
UK introduced a temporary permissions regime (TPR)
Firms passporting into the UK given temporary permission for 3 years
Need to register for the temporary permission
Then need to obtain full authorisation within 3 years

3. No Deal – Passporting out of UK
As yet – no reciprocal arrangement – general view there isn’t time to get this through the process
Temporary special conditions for central clearing of derivatives and central depositories
UK regulated firms will officially lose the right to passport into EU on 29th March

4. No Deal – Impact Most firms are authorised in the UK
EU regulators already struggling with levels of applications
EU businesses and customers will lose access to financial services – including investment funds and other complex financial products that have components based in the UK.
Financial services firms across EU could lose access to essential infrastructure housed in the UK

5. No Deal - Regulators
Duty to protect financial and payment systems and access for clients
No regulation which allows them to create an orderly wind down in a No Deal scenario or guidance on how passporting rights should be removed
How will the regulators enforce removal of passporting without causing harm to customers?

6. No Deal - Regulators
No regulator has yet provided answers to these questions – contingency planning has focused on a few areas only
A few EU regulators have advised firms to notify clients of the effects of Brexit on their services and what they are doing to reduce impact
The FCA have advised UK firms that firms must treat customers fairly regardless of where they are based – but given no guidance on how to do this if you cannot do it legally.
Most of the FCA’s no deal contingency planning focusses on firms passporting into the UK not UK firms passporting out

7. Deal Despite the rhetoric – a deal is more likely
Theresa May – bribing MPs to back her with other amendments that don’t need EU approval – e.g. better workers rights legislation in UK etc
Leaving it as late as possible – pressure more MPs into backing the deal to avoid no deal
Calls for an extension to Article 50 – still being refused
Need to agree by 11th March in order to get the legislation through by the 29th March (although I’m sure they’d speed it up!)
Next parliament vote is on 14th Feb – hoping for an amended deal in respect of Ireland

8. What does the current Deal mean?
Short Term
Transition period until December 2020 – passporting rights etc will continue
EU and UK will negotiate specific trade deals for each sector – details of these deals and what firms need to do will be made available as they are agreed
Already calls for this period to be extended due to length of time negotiations are taking

9. Financial Services
The UK’s position relies on Equivalence and bilateral Treaties to provide additional certainty
Equivalence rules at the moment are not substantial or certain enough to be a basis for future relations.
The UK currently considers it necessary for passporting to eventually end to allow both sides autonomy over future regulation

10. Current Timescales
29th March 2019 – Hopefully deal will be agreed and we will move into the transition period.
Transition period until Dec 2020 – things stay as they are
Dec 2020 – UK regulations will still be in line with EU directives but firms will probably need some form of additional authorisation and supervision to continue to passport
After Dec 2020 – regulations will begin to diverge

11. Maintaining Equivalence
Having the same regulations in Dec 2020 should allow for a less burdensome authorisation process for existing firms
Will allow Equivalence to be adapted and used to allow other mechanisms for cross-border access other than full dual authorisation
This would reduce regulatory burden for firms and governments
But the priority is to allow both UK and EU autonomy over their regulations

12. Regulators approach to Brexit
BaFin have said they are temporarily accepting internal models if they have been accepted by the UK regulators. They have said that they expect firms to move adequate resource over in time, but initially will accept that firms will not be able to relocate or source sufficient staff. Obviously over time firms will be expected to meet BaFin criteria. Encouraging firms to base themselves there
Netherlands – aiming to become centre of European Financial Sector. ‘We assume that between thirty to forty percent of the European trade in financial instruments will opt for the Netherlands as a location. Thus, the Netherlands will become the financial trading centre within the EU27’, according to Merel van Vroonhoven, Chair of the AFM.

13. Questions?

14. Craig James – Chief Executive Officer
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