The UK’s membership of the European Union came to an end on 31 January 2020 following the ratification by the UK and the EU of the Withdrawal Agreement. Under the terms of the Withdrawal Agreement, the UK will enter into a transition period, which is due to end on 31 December 2020. During this period, EU law will continue to apply in the UK in the same way as it applied prior to the UK’s exit.
HM Government and the UK regulatory authorities are undertaking a program of legislative activity to ensure that the UK continues to have a functioning financial services regulatory regime once EU law ceases to apply in the UK following the end of the transition period.
The EU (Withdrawal) Act 2018 (EUWA) functions to retain EU law and legislation implementing EU law and provides powers to amend it as appropriate for the UK legal environment. To this end, Parliament has passed a number of Statutory Instruments (SIs) amending retained EU financial services legislation. The UK regulators have also made EU Exit Instruments to amend their rules and relevant Binding Technical Standards (BTS) using powers delegated by the EUWA.
The Bank of England (Bank) and Prudential Regulation Authority (PRA) previously published policy materials including EU Exit Instruments, Supervisory Statements (SSs) and a Statement of Policy (SoP). These generally had the effective date of ‘exit day’, or ‘immediately before exit day’. Under the European Union (Withdrawal Agreement) Act 2020 (which gives effect to the Withdrawal Agreement in UK law) the commencement of these EU Exit instruments is delayed until the end of the transition period.
We published the first of these EU Exit materials as ‘near-final’ in PS5/19 The Bank of England’s amendments to financial services legislation under the European Union (Withdrawal) Act 2018’ on 28 February 2019.
We published made EU Exit Instruments and finalised statements in Section B of the 18 April 2019 version of PS5/19.
The Bank and PRA must submit a report to Parliament if we exercise our relevant sub-delegated powers under the EUWA. HM Treasury laid our report covering the financial year ending 29 February 2020 in Parliament on 17 September 2020.
On 25 July 2019 we published additional draft EU Exit Instruments, an updated draft PRA Rulebook Instrument and updated draft PRA and Bank transitional directions in CP18/19 ‘UK withdrawal from the EU: Changes following extension of Article 50’. Following the subsequent further extension of the Article 50 period from 31 October 2019 to 31 January 2020 and the entry into the transition period, we have not made final versions of the draft instruments published in CP18/19.
On 22 September 2020, we published CP13/20 ‘UK Withdrawal from the EU: Changes before the end of the transition period’, containing our further proposed amendments to made EU Exit Instruments and some additional draft instruments to reflect legislative changes that will, or are expected to be, retained in UK law before the end of the transition period. Where necessary these draft instruments incorporate and update material originally consulted on in CP18/19. As part of this consultation, we also published an updated PRA Rulebook Instrument, updated draft PRA and Bank transitional directions, and draft updates to SS2/19 ‘PRA approach to interpreting reporting and disclosure requirements and regulatory transactions forms after the UK’s withdrawal from the EU’. We may need to amend or make additional EU Exit Instruments to reflect further legislative changes made between the publication of CP13/20 on 22 September 2020 and the end of the transition period. We intend to make final versions of the draft instruments and transitional directions published in CP13/20 before the end of the transition period.
The instruments and statements are relevant to all firms authorised and regulated by the PRA, financial market infrastructure providers (FMIs) that are currently supervised by the Bank, and firms subject to the Bank’s powers as resolution authority. Some of the changes are also relevant to firms authorised and regulated by the Financial Conduct Authority (FCA), and to the Financial Services Compensation Scheme (FSCS). The instruments and statements may also be relevant to firms that might seek to apply to the PRA or FCA for authorisation, and to FMIs that might apply to the Bank for recognition.
The Bank and/or PRA may issue further statements or updates in relation to this topic, including in relation to any additional EU materials that begin to apply during the transition period.