In March 2018, the UK and the EU reached an agreement on the terms of an implementation (or transitional) period following the UK’s withdrawal from the EU. The implementation period is intended to operate from exit day, until the end of December 2020 and the extension of the Article 50 period does not change the approach. The maximum possible duration of the use of the temporary transitional power, provided for in the FSMA SI, is two years after exit day.
During this time, EU law would remain applicable in the United Kingdom, in accordance with the overall withdrawal agreement. Firms and funds would continue to benefit from passporting between the UK and the EEA as they do today with permissions reflecting the scope of a firm’s passporting permission pre-Brexit.
However, as time elapses it seems increasingly likely that we will leave the EU in a deal and if there is “no implementation period” there is no transitional period and no passporting is permissible from the day of departure, so what happens next …?
The Bank of England and PRA are hurriedly trying to address the situation. Paragraph 2.5 of the ‘UK withdrawal from the EU’ says “the Bank and PRA intend to use the temporary transitional power in a broad way to effectively delay the application of NtA changes to PRA – regulated firms’ and FMIs’ obligations, with limited exceptions.”
The rationale of this approach is to help minimise operational risks for firms/FMIs if there is no Implementation Period. This approach is intended to broadly replicate some of the effects of the Implementation Period in the event of a sudden ‘no deal’ exit.”
Further, even if there is a deal and therefore a Withdrawal Agreement with an effective Implementation period that commences on exit day, the proposed changes of the CP may take effect after the Implementation Period.
This consultation closes on Wednesday 18 September 2019 to feed into the process and doing so should form part and parcel of your Brexit plans