The UK’s membership of the European Union (EU) came to an end on Friday 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 during which EU law continues to apply to the UK. The transition period is due to last until 11pm on Thursday 31 December 2020, which is defined in UK law as ‘IP completion day’.
The UK’s withdrawal from the EU requires changes to be made to UK legislation to ensure that it remains functional. The European Union (Withdrawal) Act 2018 (the Act) converts directly applicable EU law into UK law and preserves domestic law that relates to EU membership, including domestic law and regulators’ rules that were introduced to implement EU directives. This body of law is referred to as ‘retained EU law’. The Act provides UK government ministers with powers to make changes to retained EU law so that it continues to operate effectively after the UK’s withdrawal from the EU – these processes are referred to as ‘onshoring’ or ‘nationalising the acquis’ (NtA).
The government has delegated these powers to the Bank of England (Bank), as resolution authority and financial market infrastructure (FMI) competent authority, and the Prudential Regulation Authority (PRA), to fix deficiencies in rules and Binding Technical Standards (BTS) in their remits.
On Thursday 18 April 2019, the Bank and PRA published their amendments to financial services legislation under the Act. This included final EU Exit Instruments covering NtA changes to PRA and FMI rules, and BTS in the Bank’s and PRA’s remits.
Subsequently, in light of the further extension to the Article 50 period until Thursday 31 October 2019, on Thursday 25 July 2019 the Bank and PRA published some further draft amendments to financial services legislation that came into effect during this period. These amendments were subsequently not made final following the further extension to the Article 50 period until Friday 31 January 2020.
The Bank’s and PRA’s made EU Exit Instruments were due to come into effect on ‘exit day’ (11pm on Friday 31 January 2020). However, the EU (Withdrawal Agreement) Act 2020 defers the coming into force of these EU Exit Instruments until IP completion day.
Before the end of the transition period, some further updates and amendments are needed to the Bank’s and PRA’s made EU Exit Instruments as a consequence of the transition period and the delay in the coming into force of these instruments from exit day to IP completion day. There is also additional EU legislation that applies before IP completion day and requires some further EU Exit Instruments to be made.
This Consultation Paper (CP) contains:
- Section A: an update on the Bank’s and PRA’s intended use of the temporary transitional power provided for in the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019.
- Section B: Bank and PRA consultation with proposals to fix deficiencies arising from the UK’s withdrawal from the EU and make consequential changes before the end of the transition period. Section B is split into three parts:
- Part 1 sets out Bank and PRA proposals in relation to consequential changes required to existing Bank and PRA EU Exit Instruments to update references to exit day and a small number of changes in light of adaptations to relevant EU legislation made by the European Economic Area (EEA) Agreement.
- Part 2 sets out the PRA’s proposals in relation to the PRA Rulebook and BTS that will, or are expected to, be retained in UK law.
- Part 3 sets out the Bank’s (as FMI competent authority) proposals in relation to BTS that will be retained in UK law.
This CP is relevant to all firms authorised and regulated by the PRA, including those that expect to have a deemed permission under the ‘temporary permissions regime’ (TPR) or Financial Services Contracts Regime (FSCR), or that seek to apply for PRA authorisation in the future. It is also relevant to FMIs recognised and supervised by the Bank, including those central counterparties (CCPs) that expect to have a deemed recognition under the ‘temporary recognition regime’ (TRR).
The Bank and PRA intend that the changes proposed in this CP would take effect on IP completion day.
Responses and next steps
This consultation closes on Tuesday 17 November 2020.
The PRA and Bank invite feedback on the proposals set out in this CP. Please address any comments or enquiries to CP13_20@bankofengland.co.uk.
Responses to this CP will be shared with the FCA.