The referendum result has dominated the news this week, with a majority of the UK electorate voting to leave the European Union. We issued a briefing last Friday morning, summarising the impact which that decision will have on UK financial institutions. All our Brexit briefings, including ‘What will it mean to leave the EU?’ are available on our website.
Last Friday the Financial Conduct Authority issued a statement on Brexit, which said:
“Much financial regulation currently applicable in the UK derives from EU legislation. This regulation will remain applicable until any changes are made, which will be a matter for Government and Parliament. Firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect.”
The short term legal effect which the FCA statement highlights can be summarised as follows:
|Current EU laws||No immediate impact – UK law giving effect to EU Directives such as the Consumer Credit Directive, the Mortgage Credit Directive and Payment Accounts Directive continues to apply. EU Regulations such as the Regulation on Interchange Fees for Card-Based Payment Transactions and the Market Abuse Regulation (applicable from 3 July 2016) continue to apply.|
|Powers of EU authorities||Immediate impact unlikely – powers of European Supervisory Authorities (such as the EBA) to take action against FCA or PRA for non-compliance with EU law continue. The extent to which ESAs would be willing to take action is less clear.|
|Passporting||No immediate impact – rights of UK authorised firms to provide cross-border services into, operate branches in, or market products in other EEA Member States, and the same rights for EEA Member State firms passporting into the UK continue.|
|Forthcoming EU laws||Immediate impact unlikely – The UK is obliged to implement EU Directives and enforce EU Regulations – the extent of the UK’s influence until Brexit on negotiating the content of such laws is less clear.|
The Information Commissioner announced last Friday that “The Data Protection Act remains the law of the land irrespective of the referendum result. If the UK is not part of the EU, then upcoming EU reforms to data protection law would not directly apply to the UK. But if the UK wants to trade with the Single Market on equal terms we would have to prove 'adequacy' – in other words UK data protection standards would have to be equivalent to the EU's General Data Protection Regulation framework starting in 2018.”
The Financial Services Compensation Scheme (FSCS) has also announced that the FSCS scope and coverage remains unchanged following the referendum result.
The House of Commons has published a briefing paper on 'Brexit: what happens next?' This paper considers questions about UK withdrawal from the EU and what is likely to happen in the coming weeks and months.
In other news this week, the new complaint handling rules took effect yesterday.