FIRMS should prepare for the possibility of a no-deal Brexit, says the Financial Conduct Authority (FCA), as it launches a dedicated helpline for businesses.
The City watchdog, which oversees the peer-to-peer lending market as well as the rest of the financial servcies sector, says firms who have not prepared appropriately for the UK leaving the EU without a deal may see an impact on their business.
“Firms should also consider any regulatory changes that could apply in the event of no deal,” the FCA said. “For example, MiFID II transaction reporting will change and firms should be ready to implement this.”
The FCA is launching a series of web adverts along with the free 0800 number for concerned companies who do business in Europe.
“We expect firms to ensure they are ready if there is a no-deal,” warned Nausicaa Delfas, executive director of international at the FCA. “If firms haven’t finalised their preparations, there is a risk they could be impacted.”
A recent study of UK fintech founders noted how a majority were worried about how Brexit could impact on the future of the industry over the next five years.
Delfas said the FCA had undergone significant work to prepare for the UK’s departure from the EU, including publishing extensive information on its Brexit pages and holding events for firms and trade organisations around the country.
It added that it had put in place two measures, called temporary transitional powers and the temporary permissions regime to cut the chance of disruption for financial firms in the wake of a no-deal Brexit.
Firms authorised in a European Economic Area (EEA) state can carry out activities in any other EEA state in a process known as ‘passporting’.
“Brexit will also result in the loss of passporting for UK firms doing business in the EEA,” Delfas noted.
“Whether firms need regulatory permissions to continue to do business in an EEA country will depend on the activity they are carrying on, the local law and the approach of the local authorities in that jurisdiction. Firms should make themselves aware of any transitional regimes, with deadlines or registration requirements attached to them, that have been put in place by relevant EU Member States. A list is available on the FCA website, but the FCA would draw particular attention to the Luxembourg transitional regime for existing contracts where firms must register by 15 September 2019.”
In October 2018 the Treasury put forward draft legislation on temporary transitional powers which would give the FCA the ability to delay or phase in changes to regulatory requirements for a minimum of two years after the UK exits the EU.
Additionally the temporary permissions regime allows firms with business in Europe to use a passport to operate for a limited period while they seek authorisation from the Prudential Regulation Authority if the passporting regime falls away when the UK leaves the EU.
In the event of a no-deal Brexit the temporary permissions regime will come into force, the FCA said, there will be changes to the FCA handbook, and the regulator will become responsible for credit ratings agencies and trade repositories.
The possibility of the UK leaving the EU without a deal has increased in recent weeks. Parliament is now entering a five-week progrogation period where all current legislation under discussion is suspended. This will be the longest break between Parliaments in decades.
Companies can call the FCA for help with no-deal Brexit preparations on 0800 048 4255.