This page sets out the legal and regulatory framework that would apply at the end of the transition period in the absence of further changes to reflect any new agreement on the future relationship between the EU and the UK.
Following the UK’s exit from the EU at 11pm on 31 January 2020, the UK entered a transition period agreed as part of the Withdrawal Agreement between the UK and EU. The transition period is due to end at 11pm on 31 December 2020. During the transition period, EU law will continue to apply to the UK under the terms set out in the Withdrawal Agreement Act.
At the end of the transition period, the Bank of England will assume new responsibilities related to financial market infrastructure (FMI) supervision from the EU authorities. These include the recognition of non-UK FMI, the setting of technical standards in relation to CCPs and CSDs and determining which financial products fall within the scope of the clearing obligation.
Onshoring of EU law including binding technical standards
The UK’s withdrawal from the EU requires changes to be made to UK legislation, including to ensure there is a functioning legal framework for UK financial regulation when the UK leaves the EU.
The Bank is responsible for implementing some of these legal changes, including in relation to FMI rules and FMI-related binding technical standards. A consultation on these changes was published in October and is available here. The Bank published its response to the consultation on 28 February 2019. The Bank’s policy statement includes near-final changes to FMI rules and onshored Binding Technical Standards to fix deficiencies arising from the UK’s withdrawal from the EU. The final changes to FMI rules and onshored Binding Technical Standards have now been published. Following the extension to the Article 50 period, a further consultation was published in July 2019, available here.
The Bank and PRA may need to make additional EU Exit Instruments to reflect legislative changes during the further extension of the Article 50 period from 31 October 2019 to 31 January 2020 and during the transition period between 1 February 2020 and 31 December 2020. Therefore, we have not made final versions of the draft instruments published in CP18/19 'UK Withdrawal from the EU: Changes Following Extension of Article 50' at this time.
We have also not made final versions of the Bank and PRA transitional directions published alongside CP18/19, nor have we published updated transitional guidance materials. The latest transitional guidance materials were published as ‘near-final’ in Section A of the 28 February 2019 version of PS5/19. The Bank and PRA will communicate on the status of the transitional directions before the end of the transition period.
The Bank and/or PRA may issue further statements or updates in relation to this topic, including in relation to any EU materials that begin to apply during the transition period.
The relevant Bank of England materials relating to changes to the Bank’s role as FMI competent authority are:
- The final instruments amending FMI rules and on-shored Binding Technical Standards (BTS).
- The Joint Bank and PRA Statement of Policy ‘Interpretation of EU Guidelines and Recommendations: Bank of England and PRA approach after the UK’s withdrawal from the EU.
- The Bank of England’s Supervisory Statement on non-binding Bank materials relating to FMI supervision.
- The Bank of England’s near-final Transitional Direction and guidance for FMIs setting out how the transitional power will be used, as relevant for FMIs. The final Transitional Direction will be issued, as appropriate, in due course.
- Joint Bank/PRA CP18/19 ‘UK withdrawal from the EU: Changes following extension of Article 50’
There are also three main statutory instruments that make changes to onshore EMIR. They are:
There is one main statutory instrument making the necessary changes to onshore the CSDR is below. This is:
There are two statutory instruments which make the necessary changes to the UK settlement finality regime. They are:
The Bank of England’s approach to setting the Clearing Obligation
During the transition period, the existing EU clearing obligation that applies to several classes of OTC derivatives, as set out under EMIR, continues to apply in the UK. At the end of the transition period, it will become the Bank of England’s responsibility to specify the classes of OTC derivatives that are subject to the clearing obligation in the UK.
The Bank will keep the scope of the UK clearing obligation under review.