Temporary permissions regime

The temporary permissions regime will allow EEA firms using a passport to operate for a limited period while they seek authorisation from the PRA if the passporting regime falls away on 29 March 2019.

Introduction

If the UK leaves the EU on 29 March 2019 without an Implementation Period, EEA firms currently operating through passporting in the UK under the existing European passport framework will require a Part 4A permission under FSMA to be able to continue carrying out regulated activities in the UK.

The repealing (or switching off) of passporting rights will be implemented through legislation made by the Government (the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018). This legislation has been made on the assumption that there are no new specific arrangements in place between the UK and the EU after exit.

Besides repealing passporting with effect from exit day (ie 11pm on 29 March 2019), the legislation also delivers a temporary permissions regime (TPR). The aim of the TPR is to allow firms that wish to continue carrying out business in the UK in the longer term to operate in the UK for a limited period after withdrawal while they seek authorisation from UK regulators. In the event that there is no Implementation Period, TPR provides confidence that a back-stop will be available. 

Under the TPR, a firm that is authorised to carry on regulated activities in the UK through Freedom of Establishment (FOE) or Freedom of Services (FOS) passporting can obtain a deemed Part 4A permission to carry on those activities for a maximum of three years, subject to HM Treasury’s power to extend the duration of the regime by increments of twelve months. A passporting firm that already has a top-up permission would obtain a deemed variation of that permission.

The deemed Part 4A permission means that a firm will continue to be an authorised person for the purpose of UK law. The deemed permission will cover those activities that the firm was permitted to carry on in the UK via passporting immediately before exit day.

The TPR will support the PRA and FCA’s aim of ensuring a smooth and orderly authorisation process, in support of our objectives. On that basis, we expect firms to engage with the regulators proactively during their time in TPR.

What this section contains

This section contains information on: 

  • Eligibility criteria and notification process for entry into the TPR
  • Exit from TPR
  • Extension of statutory deadlines for processing applications from EEA passporting firms 
  • Regulatory requirements for firms in TPR
  • Threshold conditions for firms in TPR
  • Possible transitional relief for firms in TPR
  • Financial Services Compensation Scheme (FSCS) Protection and TPR
  • Senior Managers and Certification Regime and TPR
  • Solvency II approvals
  • Gibraltar firms
  • Fees in TPR
  • FMIs

In addition to this update, firms are also encouraged to read the:

Eligibility criteria and notification process for firms to enter into the TPR

To be eligible for entry into the TPR, you must be authorised to carry on a regulated activity in the UK under the EU passporting regime at the point of exit.  

To enter the TPR you will need to inform the relevant regulator before exit day of your intention to enter into the regime. 

EEA firms can inform us either by

  • submitting an application before exit day for authorisation as a branch (EEA passporting firms that submitted a branch application prior to the TPR SI being made will be automatically entered into the TPR) or
  • notifying us in accordance with the PRA Direction made on 7 November 2018.

As set out in the PRA Direction, firms that choose to enter the TPR by notifying the PRA should make their notification using the form available on the FCA Connect system between 7 January 2019 and 28 March 2019. (If you are unable to access Connect, please email PRA.FirmEnquiries@bankofengland.co.uk or call 020 3461 7000.) There will be no fee for notifying to enter the TPR, and entry to the TPR will be confirmed by email.  

If you are a firm that currently passports into the UK and have a top-up permission, you will also need to inform us that you wish to enter the TPR to ensure that the part of your permission that relies on passporting continues. Top-up firms will need to follow the same approach as other firms that wish to enter the TPR, either by notifying us in the manner we have directed, or by submitting a Part 4A authorisation application. 

The legislation does not enable firms that have not applied or notified by exit day to enter TPR.  

We note Government’s commitment, in December 2017, to lay additional legislation, if necessary, to ensure contractual obligations not covered by the TPR can continue to be met.

If you have any questions about the entry process for the TPR then please speak to your usual supervisory contact, where you have one, or email PRA.FirmEnquiries@bankofengland.co.uk or call us on 020 3461 7000. 

Exit from TPR

A firm’s deemed permission in TPR can end:

  • when your application for Part 4A permission is determined – either approved or rejected
  • when we exercise own initiative power to cancel the deemed permission (or, if you are a firm with a deemed variation, to vary the permission so there are no longer any activities covered by the deemed variation).  This includes our use of the power – provided to us in the TPR legislation - to cancel your deemed Part 4A permission under TPR if you do not submit an application within the first two years of TPR or 
  • 3 years from exit day (extendable by HM Treasury by 12 month increments). 

If your Part 4A authorisation application is rejected after you enter into the TPR, you will be expected to run-off your existing UK regulated activity.  We note the Government’s commitment in December 2017 available in ‘Financial Services Update: Written statement – HCWS382’.

If you are a firm in TPR with a deemed Part 4A permission and wish to undertake further regulated activities beyond the scope of your deemed Part 4A permission, you will need to submit an application to vary your permission.

Extension of statutory deadlines

The legislation that delivered the TPR has also temporarily extended statutory time limits for UK regulators to process authorisation applications from EEA passporting firms from six months (for complete applications) and twelve months (for incomplete applications) to three years from exit day. 

The extension of statutory deadlines takes effect immediately and applies to existing applications (including ones where the statutory deadline would have expired before 29 March 2019) as well as those submitted after the making of the TPR legislation. The extension of statutory deadlines will allow us and the FCA to manage the volume of authorisation applications associated with EU withdrawal in a smooth and orderly manner, in support of our statutory objectives, including during an Implementation Period as necessary.

Regulatory requirements for firms in TPR

As noted in the Bank’s news release in July 2018, we will have the same powers in relation to firms in TPR as for other firms with a Part 4A permission. These include powers to impose requirements, and to vary or revoke permissions. Firms will be subject to the same obligations and supervisory framework as if they were a Part 4A authorised firm.   

Firms in TPR with an establishment in the UK will be required to comply with the same rules that apply to other third country branches. These are available to view in the PRA Rulebook.

For firms in TPR without a branch in the UK (cross border service providers) a more limited set of rules will apply. These are:

i. Rules that would already apply to third country firms even if they did not have a UK branch (including rules in the Fundamental Rules, Auditors, Change in Control, Close Links, Fees, General Provisions, Information Gathering, Interpretation, Notifications and Use of Skilled Persons Parts of the PRA Rulebook)

ii. Certain FSCS rules (as set out in the FSCS section below)

iii. The Senior Managers and Certification requirements that apply to third country branches (subject to amendments proposed in CP26/18).

As currently written the definition of non-Directive insurer would capture insurers in TPR operating in the UK without a branch. The PRA is proposing in CP26/18 to amend the definition so that it does not capture those firms. In other words, those firms would not fall under the non-Directive insurer definition. Instead, the set of rules noted above would apply for those firms.

Threshold Conditions for firms in TPR

Firms are not required to demonstrate that they satisfy Threshold Conditions (TCs) in order to enter into the TPR and receive a deemed Part 4A permission under the TPR. Like other Part 4A authorised firms, if you are in TPR you will be required to notify us if you become aware (or have information that reasonably suggests) that you have failed to satisfy one or more TCs, may have done so, or may do so in the foreseeable future. If it appears to us that you are in the TPR and are failing, or likely to fail, to satisfy the TCs, it will be open to us to take appropriate action, including using our powers to impose requirements or to restrict or cancel your firm’s deemed Part 4A permission.

In order for the PRA to approve an application for Part 4A permission it must be satisfied that a firm will satisfy, and continue to satisfy, the TCs. This requirement applies to firms whose applications are being considered while they are in the TPR as for all other firms.  

Possible transitional relief for firms in the TPR 

Firms entering the TPR may find it challenging to comply immediately after exit day with some requirements in our rules that will apply to them for the first time.  

Therefore we are considering (as noted in CP26/18) possible transitional relief in relation to certain aspects of following third country requirements:

  • Branch Solvency and Minimum Capital Requirements for insurance branches (but we would  expect firms to comply with  branch security deposit requirements)
  • PRA remuneration rules where they go beyond minimum CRD IV requirements
  • certain reporting obligations where they involve the segregation of branch data and the reporting and review of this data where this is not already required and
  • certain composite rules for insurance branches.

We will publish further information on possible transitional relief for firms in the TPR in due course.

Financial Services Compensation Scheme (FSCS) Protection and the TPR 

Deposits

We have proposed in CP26/18 that from exit day, deposit-takers in the TPR with a UK establishment will automatically become members of the FSCS and will be required to comply immediately with the Depositor Protection Part of the PRA Rulebook (including the UK’s depositor awareness and notification requirements, Single Customer View (SCV) requirements, and payment of levies). For example, firms would be subject to the requirements to provide an SCV file to the FSCS within three months of becoming a TPR firm, and within 24 hours of a request by the PRA or FSCS. There would be no transitional relief provided for these requirements. 

Protection for deposits held by these UK branches would begin to be provided by the FSCS upon exit day. FSCS protection will not extend to deposits held by deposit-takers in the TPR without a UK establishment or deposits which are not held by a UK establishment.  

More information on the proposals and applicable requirements is available in Chapter 8 of CP26/18 ‘UK withdrawal from the EU: Changes to PRA Rulebook and onshored Binding Technical Standards’.

Insurance

We have proposed in CP26/18 that TPR insurers will continue to be ‘relevant persons’ for purposes of the Policyholder Protection Part of the PRA Rulebook and these firms will be required to pay FSCS levies in respect of new and existing policies that are protected by the FSCS. There would be no transitional relief provided.  Currently EEA insurers conducting insurance activities in the UK using freedom of services or freedom of establishment passports are within scope of FSCS protection for insurance policies. 

For policies issued by TPR firms prior to exit day, the PRA proposes to maintain FSCS protection for previously protected policies until risks are run off, as long as the insurer remains a ‘relevant person’ under the Financial Services and Markets Act. 

For policies issued or re-issued after exit day, the PRA is proposing to change FSCS rules such that policies must relate to a risk or commitment situated in the UK, Channel Islands or Isle of Man in order to be protected.  New policies relating to EEA risks will not be protected. To be protected, policies must also be issued by an establishment in the UK, Channel Islands or Isle of Man. There is one exception in respect of freedom of services TPR firms; new policies relating to UK risks issued by EEA establishments of these firms after exit day will be protected.

More information is available in Chapter 8 of the CP26/18: ‘UK withdrawal from the EU: Changes to PRA Rulebook and onshored Binding Technical Standards’.

FCA activities

The FCA is responsible for rules relating to FSCS protection for the following activities: investment provision, investment intermediation, insurance intermediation, debt management and home finance intermediation.  For more information about the FCA’s intended approach for FSCS cover for firms in the TPR, please refer to the FCA Consultation Paper CP18/29: ‘Temporary permissions regime for inbound firms and funds’.

Senior Managers and Certification Regime and the TPR

Compliance with the PRA’s requirements under the Senior Managers and Certification Regime (SM&CR) will not be a pre-condition of entry into the TPR. 

The PRA has proposed in CP26/18 that all firms in the TPR (including cross-border service providers) will be required to have an individual approved to perform the Head of Overseas Branch function (SMF19). In some circumstances the PRA Rulebook requires third country branches also to have persons approved to perform other PRA Senior Management Functions(SMFs) (eg Chief Risk function (SMF4) or With-Profits Actuary function (SMF20a)). Where those circumstances arise for firms in the TPR (including cross-border service providers), the PRA has proposed that they will be required to have persons approved to perform the relevant additional SMFs.

The statutory instrument establishing the TPR allows the PRA and FCA to treat individuals as if they were approved to perform an SMF while their firms are in the TPR, if those firms have submitted an application under section 60 of FSMA on their behalf (‘Section 60 applications’).

The PRA may give these deemed approvals to individuals performing any SMF. If you are a firm currently operating in the UK through an EEA branch, your population of PRA SMFs may already be approved by the FCA as EEA Branch Senior Managers (SMF21) but you will need to make new section 60 applications to the PRA for individuals performing PRA SMFs while in the TPR.  

This deeming will operate as follows:

  • Where firms have submitted a Part 4A permission application accompanied by the relevant full SMF applications in advance of entry into TPR, the PRA (with the FCA’s consent) can decide to treat the individuals as approved with effect from entry into TPR. Individuals will not be required to undergo the standard PRA fitness and propriety assessment to be eligible for deemed approval.
  • Firms that have not submitted full SMF applications prior to entry into TPR will need to complete and submit application form(s) (‘TPR SMF Application’) containing key information on the individual(s) they propose to perform SMFs while they remain in the TPR. This TPR SMF Application will be based on the current Short Form A (available on the dedicated SMR approvals webpage) and include a short Statement of Responsibilities. After receiving a TPR SMF Application the PRA (with the FCA’s consent) can decide to treat the relevant individual as approved.  Individuals will not be required to undergo the standard PRA fitness and propriety assessment to be eligible for deemed approval. The PRA has proposed in CP26/18 to provide firms in TPR with a period of up to 12 weeks from exit day in which to obtain deemed (or full) approval for individuals who require it. 

Other requirements under the SM&CR will apply to individuals with deemed approval, including the Conduct Rules and Senior Manager Conduct Rules.

More broadly, PRA SMFs in firms which submit (either prior to their entry into TPR or during TPR) a Part 4A authorisation application will undergo a full fit and proper assessment by the PRA/FCA (including interviews at either regulator’s discretion). PRA approval, (with the FCA’s consent), will be subject to the outcome of such assessments. Firms should not treat a deemed approval as an SMF as an indication that we and/or the FCA are satisfied as to that individual’s fitness and propriety to perform that or any other SMFs on a permanent basis.

Certification Regime and Regulatory References

Deposit-takers operating in the UK through an EEA branch are also currently subject to the Certification Regime under the FCA’s rules (in respect of any relevant UK-based employees) and will remain so if they enter into the TPR.  They will also become subject to the PRA’s Certification rules (which do not give rise to additional obligations). The Certification Regime will become effective for insurers, including those operating in the UK through an EEA branch on 10 December 2019, ie 12 months after the proposed extension of the SM&CR to insurance firms on 10 December 2018. Insurers will have 12 months to complete the first round of annual certifications. The proposed implementation date of the Certification Regime for insurers will be unaffected by an EEA branch’s entry into the TPR.

Likewise, since 7 March 2017, our and the FCA’s requirements on regulatory references apply to all dual-regulated firms, including deposit-takers and insurers currently operating in the UK through an EEA branch (in respect of their UK-based SMFs, Senior Insurance Manager Functions (SIMFs) and, where applicable, Certified employees, Notified NEDs and Key Function Holders (KFHs)). This will remain the case if and when any of these firms enter into the TPR.

We also propose to apply the Certification Regime and Regulatory References to firms without a UK establishment currently operating in the UK through a FOS passport which enter into the TPR.  The PRA is considering using its temporary transitional power to provide for transitional relief for firms without a UK establishment in relation to Certification Regime, and Regulatory References requirements.

The PRA’s Conduct Rules will apply to SMFs with deemed provisional approval and employees subject to the PRA’s Certification rules (ie UK Material Risk Takers (MRTs)) from the moment their firm enters into the TPR. Individuals in firms operating in the UK through an EEA branch and currently subject to the FCA’s Conduct Rules will remain subject to those requirements while their firms are in TPR.  They will also become subject to the PRA’s Conduct rules (which do not give rise to additional obligations).

Solvency II approvals

Eligible EEA insurers that had relevant SII approval(s) from an EEA regulator prior to entering the TPR will be deemed to have been granted corresponding approval by us while the insurer remains in the TPR. Deemed approval will be granted by the PRA with respect to regulations listed in the TPR SI.

Gibraltar firms 

Government issued a statement on 8 March 2018 where it committed to guaranteeing Gibraltar financial services firms access to UK markets as now until 2020, and to working closely with the Government of Gibraltar to design a replacement framework to endure beyond 2020. Consequently firms headquartered and authorised in Gibraltar that conduct regulated activities in the UK through their deemed passport under Schedule 3 of FSMA are expected to continue to operate in the UK without the need to join the TPR. 

Fees

You will not pay a notification fee if you notify us of your intention to enter the TPR. 

However, if you are an EEA passporting firm without a top-up you will be required to pay the new authorisations fee of £25,000 on submission of an application for authorisation,  in accordance with our and the FCA’s fees rules. 

If you are an EEA passporting firm with a top-up you will be required to pay a fee of £12,500 on submission of an application to vary your existing Part 4A permission, in accordance with our and the FCA’s Fees rules.

We intend to consult on the periodic fees payable by firms in the TPR for the 2019/2020 fees year in the first half of 2019 as part of our annual fees rates process.

FMIs

If you are a CCP requiring authorisation and seeking information on the TRR, please see Information on the effect of the UK’s withdrawal from the EU on FMI supervision.

 
This page was last updated 07 November 2018
Was this page useful?
Add your details...