On December 20, 2017, Philip Hammond, the UK Chancellor of the Exchequer, made a written statement in the UK House of Commons on behalf of Her Majesty’s Treasury (HM Treasury) announcing the Bank of England’s (BoE) plans to ensure continuity in financial services in the unlikely event of an agreement not being reached with the European Union (EU) leading up to the UK’s exit from the EU.
The BoE offered its approach to ensure that there is continuity in financial services in a series of documents that were also published on the same date.
The UK government’s plans include:
- Bringing forward legislation, if necessary, that will enable EEA firms and funds operating in the UK to obtain a so-called “temporary permission” to continue their activities in the UK for a limited period after the UK exits the EU.
- Legislating to ensure that contractual obligations, such as insurance contracts not be covered by the temporary permissions regime mentioned above, can continue to be met.
- Bringing forward secondary legislation to ensure that UK authorities can carry out functions currently undertaken by EU authorities. The government proposes to give the BoE functions and powers in relation to non-UK central counterparties and non-UK central securities depositories. If necessary, the government will also provide for a temporary regime to enable the BoE to permit these firms to continue to operate in the UK for a limited period after the UK’s exit from the EU.
- Providing the UK Financial Conduct Authority (FCA) with functions and powers in relation to UK and non-UK credit rating agencies and trade repositories, and any powers necessary to manage the transition post-exit. HM Treasury will work with the BoE and the FCA to determine how they will use these powers, consistent with their statutory objectives.
The written statement emphasized the importance of putting the technical arrangements in place to avoid market disruption. The government’s plans aim to ensure that the UK’s position as the world’s leading financial center is maintained and that UK customers are protected.
A copy of the written statement is available here.