The Financial Conduct Authority has reached an agreement with EU regulators as to the sharing of information and cross-border cooperation in the event the UK leaves the European Union without a withdrawal agreement or implementation period.
One of the MoUs covers supervisory cooperation, enforcement and information exchange with the EU and EEA member state regulators and the other addresses the supervision of credit rating agencies and trade repositories with Esma.
Andrew Bailey, chief executive of the Financial Conduct Authority, said: “I am pleased we have been able to agree these MoUs, they will allow for continued close cooperation in the event the UK leaves the EU without an agreement.
“They should also minimise the potential for disruption, which we know is particularly important for the investment management sector, credit rating agencies and trade repositories.”
The regulator said it continues to plan for a range of scenarios until a Brexit agreement is reached.
It has pledged to implement its temporary transitional powers “broadly” in the event of a no-deal Brexit, to minimise the regulatory disruption caused to financial services firms.
The Treasury has put forward draft legislation that would grant the regulator transitional powers if the UK leaves the EU without a withdrawal agreement.
In an update published today the regulator detailed it would use these powers to ensure firms and other regulated entities could generally continue to comply with their pre-exit regulatory obligations for a temporary period.
This temporary transitional power would allow the Financial Conduct Authority to “delay or phase in” changes to regulatory requirements made under the EU (Withdrawal) Act 2018 for a maximum of two years from the date the UK exits the European Union.
The regulator said in exercising this power, firms should be able to adjust to post-exit regulatory requirements in an “orderly way”.
It is the EU (Withdrawal) Act 2018 that has enabled the “onshoring” of financial services legislation in the UK, by converting existing European rules into British regulation.
Nausicaa Delfas, executive director of international at the Financial Conduct Authority said: “The temporary transitional power is an important part of our contingency planning.
“In the event that the UK leaves the EU without an agreement, it gives us the flexibility to allow firms and other regulated persons to phase in the regulatory changes that would need to be made as a result of ‘onshored’ EU legislation.
“This will give firms certainty, ensure continuity, and reduce the risk of disruption.”
In its latest update the Financial Conduct Authority stood by its previous advice that the majority of firms do not need to take any immediate action for regulatory changes under a no-deal Brexit, but did advise a small proportion should begin preparing to comply with the changed obligations now.
This minority of firms included firms subject to the MiFID II transaction reporting regime, those subject to reporting obligations under European Market Infrastructure Regulations and firms intending to use credit ratings issued or endorsed by FCA-registered credit ratings agencies after exit day.
Ms Delfas said: “There are some areas such as reporting rules under MiFID II, where it would not be appropriate to provide a phase-in, as receiving these reports is crucial to our ability to ensure market oversight and the integrity of financial markets.
“In these areas only, we expect firms and other regulated persons to begin preparing to comply with the changes now.”
Originally posted by Rachel Addison of FT Adviser
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