The FCA has revealed its final, final, definitely the last for the time-being no deal Brexit plans and it contains some valuable reassurances on customer protections, but it’s a sobering thought to remember that there’s still a very good chance that all of this will have been for nothing.
The announcement confirms that companies from the European Economic Area will have access to the financial services compensation scheme even in the event of no deal. Those firms in the temporary permissions regime will have similar cover to other UK authorised firms.
The move comes about, said the regulator, to avoid customers of EEA firms losing protections that they might have thought they already had. As things stand, they, said there is no guarantee that home state compensation schemes would continue to cover customers after Brexit.
Herein lies the problem. Nobody is doubting that this work was necessary, but if the UK does somehow scramble a deal or finds a way to avoid Brexit altogether, it will all have gone to waste. Unfortunately, no matter what the outcome in a few weeks’ time, much of the work the FCA and other UK authorities have done over the past couple of years will have been a waste of time.
Brexit has dominated preparations ever since the referendum. It has cost millions and sucked up valuable human resources and the task is made even harder because at no point has there been any certainty about the final nature of Brexit. What was supposed to be the easiest trade deal in history has turned out to be anything but.
The problem is that other things fall through the cracks. This month news emerged that HMRC is planning to delay sending out £100 penalty notices to those people who failed to file their tax returns on time, because Brexit continues to dominate so much of their time. That simple fact is creating a host of additional issues for people and regulators alike.
To be clear, HMRC is not saying that they will not impose the fine. That will be applied as normal, but they will simply take their time sending out the notifications. Depending on whether a withdrawal agreement is reached or not, that could be as late as April, but that raises various additional questions.
Those people who fail to file a tax return three months after the penalty face a daily fine of £10 and that can cause enormous hardship, especially if they are already struggling to find the money to pay their tax. Many are asking the natural question: will that daily rate still kick in at the three months point or will that be postponed also?
If so, is there a uniform postponement or are deadlines set on an individual basis depending on when they receive the notification? For a beleaguered HMRC, which is already struggling to keep up with the demands placed upon it, life becomes ever more complicated, but they might take some solace in the notion that they are not alone.
The FCA has also been working hard on Brexit, producing various guidelines for what will happen in the event of each scenario. They have been negotiating with their European counterparts to ensure some form of regulatory consistency continues after Brexit day and all that work is taking its toll.
In 2017, the regulator saw the number of fines it imposed drop by 60% during a time when it said Brexit was dominating its workload. At a time when it is trying to crack down on financial wrongdoing, its attentions are being diverted elsewhere. In the last year we’ve had countless releases detailing Brexit negotiations. The FCA budgeted £30 million to tackle the extra regulatory cost of Brexit during 2018.
This comes at a time when regulators have been managing a host of new regulations. From MiFiDII to GDPR they all take time, require engagement and efforts to enforce it. With their attentions split between pursuing their own regulatory goals and managing the cost of Brexit it’s difficult to keep all bases covered.
The financial sector faces a similar problem. On top of the time and money spent adapting to regulatory change it is also devoting resources to Brexit preparations – which in turn are made all the more difficult because even now, with the deadline just weeks away, nobody can confidently predict what form Brexit will take.
Brexit, then, continues to cause trouble across the board. Resources are finite. A limited workforce only has so many hours in the day which inevitably means things are slipping through the cracks.