Both the EBA and ESMA have issued updates on planning for the UK’s possible departure from the EU without a ratified withdrawal agreement on 31 October 2019.
The EBA’s communication (the “Communication”) addresses the remaining issues relating to financial institutions’ preparations and follows on from the EBA’s previous opinions and communication (see our related briefing here).
According to the Communication (here), while significant progress has been made, financial institutions must continue to implement contingency plans for the possibility of a “no-deal Brexit” and guard against complacency. Specific areas that merit heightened attention include the need to operationalise relocation plans and to ensure effective communication to customers.
The EBA’s October 2017 opinion set out general principles around authorisation as well as specific recommendations around governance to avoid the risk of “empty shell” companies. According to the Communication it is imperative that these principles are adhered to. In this regard, the EBA notes that National Competent Authorities (“NCAs”) remain concerned about the practical implementation of authorisation and relocation plans by financial institutions. In particular, in some cases where authorisations have been granted, it is not clear that the associated transfer of assets, skilled staff and risk functions have been implemented to the fullest extent. Firms must have the capability to manage the risks they generate from the first day after the withdrawal of the UK from the EU.
In addition, the Communication notes that if the UK becomes a third country on 1 November 2019 it is imperative that financial institutions have already assessed whether the personal data of their clients need to be transferred from the EU27 to the UK and, if so, that they have taken appropriate mitigating actions under the General Data Protection Regulation 2016/679.
Noting that NCAs have made significant efforts to inform relevant regulated financial institutions of the need to communicate effectively to their customers on how they may be affected by the UK withdrawal, the Communication reminds these firms that they must ensure that they have taken the EBA’s previous opinion and communication into careful consideration and can satisfy themselves that they have engaged with all their relevant customers and have provided clear and adequate information on the risks and mitigating measures being taken.
The EBA and NCAs will continue to monitor the final stages of contingency planning and customer communication by financial institutions and how they and their customers may be affected by a no-deal Brexit.