The financial regulator is stepping up its preparations for a no deal Brexit, so how concerned should we be?
It started out as the ‘easiest deal in human history’ and has gone steadily downhill from there. Today achieving a Brexit deal which keeps everyone happy appears almost impossible, which is why the last month has seen preparations for the dreaded no deal scenario step up a notch.
First came the no deal papers detailing what no deal might mean for the financial sector and it doesn’t make pretty reading. There’s plenty of both consumers and the banks to be worried about. Transferring money in Euros could become slower and more expensive. Companies which pay suppliers in Euros could find themselves paying more for the privilege and the end of the ban on surcharges could see you paying much more if you use your credit card overseas.
Then we come to the thorny issue of passporting in which firms in the UK can do business in Europe and vice versa. The UK said it was up to the EU to make the first move to ensure continuity for UK businesses operating in Europe. If they didn’t UK firms would lose the ability to do business on the continent.
The report states:
“This may have implications for their ability to meet contractual obligations with EEA-based clients, where to do so without EEA permissions would breach relevant member state rules and any applicable EU rules that apply to third countries.”
The UK has shown a commitment to ensure continuity for EEA firms and funds operating here. At the start of October, the FCA released a consultation paper on a temporary permissions regime which could see those EEA firms affected given temporary permission to do business in the UK even in the event that we leave without a transition deal.
Under the proposals, firms would be able to apply for temporary permission which would start on exit day assuming there is no other deal in place. This would ensure continuity as much as possible and give the firm time to apply for permanent permission under whatever regulatory environment we find ourselves post Brexit.
They have also set out another consultation paper for what changes it will make to its handbook and its Binding Technical Standards. You can see a summary of both these papers on our platform.
As things stand, though, the EU has not made any similar offer for UK firms which leaves companies struggling to decide whether to shift operations out of the UK and into the UK. So, while these documents might have been intended to ease the fears of the financial sector, they’ve managed to focus minds on just how realistic the dreaded no deal exit scenario is starting to look.