The Financial Conduct Authority (FCA) has published near-final rules and guidance that will apply in the event the UK leaves the EU without an implementation period.
As the UK prepares to leave the EU, the FCA has been working to deliver “a transition that is as smooth as possible”. Most of the changes proposed will be made under powers given to the FCA under the EU (Withdrawal) Act, they are subject to approval by the Treasury.
The FCA’s proposals also provide details on the treatment of Gibraltar-based firms after Brexit and the temporary transition power.
This power would give the FCA the ability to waive or modify changes to regulatory requirements which have been amended under the EU (Withdrawal) Act.
The regulator said it intends to use the power so firms and other regulated entities “do not generally need to prepare now to meet new UK regulatory obligations”.
In most cases, it said, it plans to allow firms a period of 15 months to adapt to the changes.
In the case of the banking sector, it warned there could be disruption to access to payment systems.
In a no-deal scenario, the FCA said there is a risk that the UK will no longer remain within the geographical scope of the Single European Payments Area (SEPA) schemes. While UK Finance has made an application for the UK to maintain participation in SEPA schemes, UK payment service providers will need to ensure they could rely upon alternative arrangements for sending and receiving Euro payments to the EEA, or other third-country members of SEPA, if the UK’s application is not approved.
In some cases, this may mean checking that your correspondent banking partner has a clear plan to support Euro payments to the EEA, or other third-country members of SEPA, for your customers and you are satisfied with it.
Changes to the ability of UK banks to access these payment systems may increase the transaction time and cost for overseas payments by international transfer for your firm. Where there will be customer impacts, we expect you to provide clear information to customers ahead of time, and that any increased charges are commensurate to the additional costs to firms.
Nausicaa Delfas, executive director of international at the FCA said: “The FCA has been preparing for a range of scenarios, including the possibility that the UK leaves the EU in March 2019 without an implementation period. The documents published today are a significant milestone in this work: they ensure that there is a functioning regulatory regime from day one, and that firms are clear as to the requirements they need to meet by end March 2019 and beyond, so they can continue to meet the needs of their customers.”