The Financial Conduct Authority (FCA) has warned financial service firms that they need to be ready for the end of the Brexit transition period by 31 December.
The financial watchdog has set out in detail the considerations to help firms understand if or how they will be affected and what action they may need to take.
These include the Temporary Permissions Regime which will enable relevant firms and funds that passport into the UK to continue operating in the country, providing that they notify the FCA no later than 30 December.
If a firm decides not to go down this route, the FCA expects them to confirm the right outcomes for their customers and provide timely communications to allow them to make appropriate decisions.
The FCA Handbook has also been updated with changes to regulatory requirements that will apply to firms.
FCA executive director Nausicaa Delfas said, “With just a month to go until the end of the transition period, firms need to make sure they are prepared for the end of passporting, and for the new financial services landscape after the end of the transition period.”
She added, “To help minimise disruption, we have onshore EU legislation and established temporary regimes to allow non-UK firms and funds to operate in the UK after 31 December 2020. We remain committed to open markets, international co-operation and high international standards of regulation.”
British and European negotiators are trying to hammer out a trade deal but unlike most other main economic sectors, the financial services industry has largely been excluded, despite its importance to the British and European economies.
The European Union rejected UK proposals to include a detailed financial services chapter, covering issues such as regulatory co-operation, in any trade deal, arguing that it might turn into a British attempt to retain market access by the back door.
As a result, the City of London is still in the dark about equivalence arrangements although last week the European Securities and Markets Authority (ESMA) confirmed that European banks operating in the UK would continue to be subject to EU regulations in trading derivatives when the Brexit transition period ends on 31 December.
This means British counterparties will have to use a UK authorised platform, while EU counterparties have to use one within the block or in a non-EU country like the US that already been granted “equivalence” or permission, such as the US from 1 January 2021.