Transitioning to post-exit rules and standards

Overview

The UK left the EU at 11pm 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 entered into a transition period, which ended at 11pm on 31 December 2020. During this period, EU law continued 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 have legislated to ensure that the UK continues to have a functioning financial services regulatory regime once EU law ceased to apply in the UK following the end of the transition period. 

The EU (Withdrawal) Act 2018 (EUWA) retains certain EU law and UK legislation implementing EU law and provides powers to amend it as appropriate for the UK legal environment. Before the end of the transition period, Parliament made 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. Key materials are set out in the tables below.

Key Bank and PRA relevant Policy Materials and PRA Interpretive Statements and EU Exit Instruments

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.

Interpretive statements

Key Bank and PRA EU Exit Instruments

These EU Exit materials commenced at the end of the transition period (or immediately before in the case of amending and consequential changes).

Summary of publications

In consultations in October 2018 and December 2018, the Bank of England (Bank) and Prudential Regulation Authority (PRA) published policy materials including draft EU Exit Instruments, transitional directions and associated guidance documents, Supervisory Statements (SSs) and a Statement of Policy (SoP). 

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 the first set of made EU Exit Instruments and finalised statements in Section B of the 18 April 2019 version of PS5/19. 

These 2019 materials generally had the effective date of ‘exit day’, or ‘immediately before exit day’. Under the European Union (Withdrawal Agreement) Act 2020 (which gave effect to the Withdrawal Agreement in UK law) the commencement of these EU Exit instruments was delayed until the end of the transition period. 

In consultations in July 2019, during an extension of the Article 50 period, and September 2020, during the transition period, the Bank and PRA published additional draft policy materials including revised and amending EU Exit Instruments, transitional directions, Supervisory Statements (SSs) and Statement of Policy (SoP).

On 18 December 2020 we published additional made EU Exit instruments and the final Bank transitional direction as well as updated interpretive statements and other policy materials in PS27/20 ‘The Bank of England’s amendments under the European Union (Withdrawal) Act 2018: Changes before the end of the transition period’. In PS27/20, we published the PRA Rulebook EU Exit Instrument 2020 and PRA transitional direction and related guidance documents as near-final due to dependencies on CRDV rules.

On 28 December 2020 we published the final PRA Rulebook EU Exit Instrument and final PRA transitional direction and related guidance documents in PS30/20.

Transitional Directions and Guidance documents

The ‘Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019’ Statutory Instrument (SI) created a temporary transitional power (TTP) for use by the UK’s financial services regulators (the regulators) to delay the application of, or otherwise modify, firms’ regulatory obligations where they changed as a result of an SI made under Section 8 of the EU (Withdrawal) Act 2018. These changes are referred to as ‘onshoring’ changes.

The TTP is available for use by the UK’s financial services regulators in order to grant transitional relief for a period of up to two years from the end of the transition period.

We used the TTP to provide broad transitional relief, with key exceptions, for 15 months after the end of the transition period, until Thursday 31 March 2022 (the TTP period). That period has now expired and firms are expected to comply in full with all onshoring changes.

For firms in the TPR or Supervised Run-Off (SRO) regime specific transitional relief was available in relation to some of the new third-country requirements applicable for the first time to firms in the TPR or SRO. The latest expiration date for this specific relief was also Thursday 31 March 2022.

In order to preserve the effect of the TTP for CRR restatement provisions, the PRA included a mirror provision in the Interpretation Part of the PRA Rulebook. This replicated the effect of the PRA’s transitional direction for CRR restatement provisions until Thursday 31 March 2022, when the general direction expired.

Reports to Parliament

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. Our report covering the financial year ending 28 February 2021 was laid in Parliament on 21 September 2021.

The Bank extended on 4 January 2022 transitional relief to Goldman Sachs on certain onshored CRR requirements applicable to internal TLAC. This firm-specific direction will expire along with the TTP two years after the end of the transition period (11pm Saturday 31 December 2022).

The Bank and/or PRA may issue further statements or updates in relation to this topic.