On 8 October 2018, HM Treasury published a paper explaining its intention to provide the Bank of England, the PRA and the FCA (the UK regulators) with a temporary transitional power to phase in requirements for UK regulated firms that will change under onshoring legislation.
The power will be delegated to the UK regulators by secondary legislation under the European Union (Withdrawal) Act 2018 (the Act) and will only be used in the no-deal scenario. The power could be used where, in the judgement of the UK regulators, transitional provision would be appropriate to enable firms to adjust to the post-exit regulatory framework in an orderly way. Transitional provision could include, for example, delaying onshoring changes so that firms could comply with pre-exit standards for a limited time after exit, rather than needing to implement the relevant onshoring changes by 29 March 2019. Transitional relief could not be granted if this would undermine the UK regulators’ statutory objectives. The power could not be used for any purpose other than facilitating firms in adjusting to the UK’s post exit regulatory regime. As such, it could not be used to waive or modify a firm’s pre-exit obligations where they are unaltered by legislation made under the Act.
The power to make transitional provision would be available to the UK regulators for two years from exit. Transitional provision made using the power would cease to have effect after two years from exit.
The power could be used to grant transitional relief in relation to changes under the Act which have been made to regulatory requirements where UK regulators are responsible for supervising compliance, including regulatory requirements which form part of:
- PRA and FCA rules made under the Financial Services and Markets Act 2000;
- onshored binding technical standards;
- onshored EU financial services regulations or delegated regulations;
- relevant UK primary or secondary legislation.
Transitional relief could be granted to particular firms, classes of firms, or all firms to which a particular onshoring change applies, including firms that have entered into one of the transitional regimes referred to above. Firms would not need to apply for transitional relief in order to benefit from it. Rather, the UK regulators will issue “directions” that set out the terms of the proposed transitional relief. The directions would normally be published on the UK regulators’ websites, except where this was inappropriate or unnecessary.
HM Treasury proposes to confer this power on the Bank of England, the PRA and the FCA in an affirmative procedure Statutory Instrument under the Act. The SI will be laid before Parliament in due course.