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 an 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.
Prior to the UK and EU agreeing the Withdrawal Agreement, HM Government and the UK regulatory authorities undertook a program of legislative activity to ensure that the UK continues to have a functioning financial services regulatory regime following its exit from the EU.
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 passed a number of Statutory Instruments (SIs) amending retained EU financial services legislation. The UK regulators 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 PS5/19 ‘The Bank of England’s amendments to financial services legislation under the European Union (Withdrawal) Act 2018’ of the 18 April 2019 version of PS5/19.
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’.
We may need to amend or 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 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 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 EU materials that begin to apply during the transition period.