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Brexit Transition Agreement Financial Services

September 12th, 2021

The Czech government has prepared a draft law that will temporarily govern relations between the Czech Republic and the United Kingdom if the United Kingdom leaves the EU without a withdrawal agreement having been signed. It is expected to be approved by the Czech parliament by the end of February. To benefit from this exemption, the UK company must prove that it is licensed and monitored in the UK for the services it wishes to provide in the Netherlands. It is now time for regulated financial service providers to implement their no-deal Brexit contingency plans, given that the likelihood of a trade deal before 31 December 2020 is diminishing. Equivalence is the idea that, in a given sector, a non-EEA State may have a regulatory system equivalent to the standard in force under EEA law. Depending on the nature of the equivalence determination, the equivalence regime may allow undertakings from such a non-EEA State to provide services to EEA persons without being authorised by EEA law. The practical effect of equivalence can therefore, in some cases, be described as a corresponding (as regards access). There are, however, some important differences between passporting and equivalence. The government`s approach to ensuring that the UK continues to have an effective financial services regulatory system at the end of the transitional period involves the transformation of EU legislation into UK law, a process called onshoring. There is at least some security for the financial services industry. Passporting ends on 31 December and is replaced by rules from third countries or, in the best case, by equivalent rules.

The free movement of persons and the guaranteed transmission of data will come to an end. It is not certain that there will be agreements between the UK and the EU that go beyond WTO rules and standard EU treatments in third countries. The United Kingdom`s exit from the European Union is a vast and complex process that has a huge impact on how we take responsibility. Many parts of the Bank have worked closely together to assess the potential impact of leaving the EU on our monetary and financial stability policy objectives. The ACF expects companies to consider the impact of a number of scenarios, including the possibility for the UK and the EU/EEA to conclude a free trade agreement or conclude equivalencies before the end of the transition period. This letter provides a useful overview of both what the government is likely to want to do in its negotiations with the EU and the future. The letter builds on the political declaration that accompanied the Withdrawal Agreement and is a timely reminder of what Brexit could mean for the financial services sector. The impact of Brexit on EU companies that bring their services to the UK must also be taken into account.

The UK government has put in place a temporary authorisation scheme for certain EU companies, investment funds and their managers who initiate their services in the UK (the “Temporary Leave Scheme”). This scheme allows certain EU companies to operate for a limited period of three years and thus continue to provide cross-border services in the UK, while having the authorisation of the relevant UK regulatory authority. Companies are required to inform the Financial Conduct Authority (“FCA”) if they wish to use the temporary authorisation scheme. Fund managers must also notify the ACF of the funds they wish to continue marketing in the UK. The Economy Minister also notes that after Brexit, the UK could “make an equivalence decision for a third country if the EU has not done so”. Glen continues that “the equivalence process will be one of the most important instruments to facilitate cross-border financial services activities in the UK and it will be up to the government to decide how it can exercise it in the interest of the UK”. . . .

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