Hard Brexit: National legislative initiatives under banking and finance regulatory law

Belgium

Brexit related measures (as at 28/2/19)

• Draft law submitted to the Belgian Parliament.

Content (as at 28/2/19)

• On 19 February 2019, a draft law with certain temporary measures to address a potential “Hard Brexit” was submitted to the Belgian Parliament under the emergency procedure. The intent is to have the law adopted by Parliament and entered into force by 30 March 2019 (provided no deal is found by 29 March 2019).
• In practice, the draft law in itself does not provide any concrete measures for regulated entities but it empowers the Belgian Government to adopt measures regarding financial entities (including payment institutions and e-money institutions) in order to “ensure the continuity of the contracts entered into by those entities with the Belgian customers”. The content of the measures that the Belgian government intends to adopt is not known yet.

France

Brexit related measure (as at 28/2/19)

• An “empowerment Law” was adopted on 17 January 2019 by the French Senate to enable the government to adopt measures to take transitional measures in the event of hard-Brexit. The government is planning on adopting several ordinances to implement measures to anticipate the consequences of a Hard Brexit.
• There will be 5 different ordinances that will apply to the various economic and social sectors potentially impacted by a Hard Brexit to ensure “the continuation, on French territory, of economic activities related to the United Kingdom”.
• The ordinance related to financial services has been published on the French Official Journal dated 6th February 2019.

Content (as at 28/2/19)

• The ordinance on Financial services contains provisions related to: the access by French entities to interbank settlement and delivery settlement systems in third countries, including the United Kingdom, by ensuring the definitive nature of settlements made through these systems and the designation of a competent and the uninterrupted use of framework agreements concerning financial services and the securing of the conditions for the execution of contracts entered into prior to the end of the recognition of British entities’ licences in France.
• The head of the ACPR (Mr. François Villeroy de Galhau) has also mentioned that the ACPR will propose “the implementation of an appropriate transitional regime for the extinctive management of contracts which allows British companies to continue their activities initiated under the European passport, provided that they submit a liquidation programme to the ACPR”.
• However, at this stage, there has not been any official communication on the existence or the duration of a potential transitional period.

Germany

Brexit related measure (as at 28/2/19)

• Draft of law with transitional provisions in case of a Hard Brexit (“Brexit-StBG“) dated 19 December 2018; not entered into force yet; approved by German Parliament on February 21, 2019.

Content (as at 28/2/19)

• The Brexit-StBG does not cover payment institutions and e-money institutions.
• Authority of BaFin to grant right for UK regulated banks, financial institutions, insurance undertakings, e-money institutions and payment institutions to continue using the European passport up to 21 months after occurrence of a Hard Brexit (i.e. until 29 December 2020).
• Decision must be based on particular reasons related to each service. In case of payment institutions and e-money issuers the decision must be necessary to avoid disadvantages for the functionality or stability of the payment services market.

Italy

Brexit related measure (as at 28/2/19)

• A technical table between the Italian Ministry of Economy and Consob is preparing a new law to deal with the problems connected with non-standard derivatives agreement which are not regulated amongst central counterparty.
• A law decree is under preparation to deal with the Hard Brexit scenario and will be issued before 29 March 2019.

Content (as at 28/2/19)

• The law is aimed to regulate over a period of 21 months the activity in Italy of UK financial intermediaries and asset managers and should be based on the EU Commission recommendations having the purpose to avoid any financial and economic shock during the transition period.
• The law should be applicable to the 70 banks, 233 payment institutions and 100 electronic money issuers based in the UK, plus 58 insurance company and 21 pension funds.

Netherlands

Brexit related measure (as at 28/2/19)

• Legislative proposal with transitional provisions for a Hard Brexit (“Verzamelwet Brexit“); not entered into force yet; approved by the Dutch House of Representatives on 29 January 2019.
• Transitional regime regarding the right of residence of UK citizens in the Netherlands.
• Amendment to the Exemption Regulation under the Financial Supervision Act (“Vrijstellingsregeling Wft“).

Content (as at 28/2/19)

• The Verzamelwet Brexit does not specifically relate to provision of regulated services. Based on this act, measures can be taken by governmental decree or for reasons of urgency by ministerial regulation (e.g. by the Minister of Finance) to deviate from an act of parliament insofar this is necessary in the light of preventing unacceptable consequences of the Brexit. Until six months after the Brexit, (transitional) measures can be taken on the basis of the Verzamelwet Brexit.
• Based on the transitional regime regarding the right of residence of UK citizens in the Netherlands, UK citizens and their family members that reside legitimately in the Netherlands prior to Brexit on 29 March 2019 will be allowed to reside, work and study for at least 15 months in the Netherlands in case of a Hard Brexit.
• On the basis of the amendment to the Exemption Regulation under the Financial Supervision Act, investment firms that provide investment services on a cross-border basis from the UK in the Netherlands to professional clients and eligible counterparties or trade on own account with such parties are temporarily exempted from the authorization requirement. This temporary exemption applies until 1 January 2021 and will only come into force in case of a Hard Brexit.

Spain

Brexit related measure (as at 28/2/19)

• The Spanish Government has announced that it is currently drafting a Royal Decree-Law with Brexit-related measures (the text of the draft bill is not public).

Content (as at 28/2/19)

• The only information publicly available would be the one provided in some non-binding Q&A’s published by the Spanish Government and the Bank of Spain, giving some hints as to the legal regime that will be applicable in each of the possible scenarios (i.e. the provisions of the Commission’s “Withdrawal Agreement” in case of a “Deal Brexit” (either soft or hard), and the European “third-country regime” in case of Hard Brexit).
• In the event of a Deal Brexit, the Spanish Government has stated that it will supplement the measures envisaged in the Withdrawal Agreement for financial services with local measures (not disclosed yet).
• No specific reference for measures relating to a Hard Brexit scenario have been made yet.

UK

Brexit related measure (as at 28/2/19)

• Proposal for a Temporary Permissions Regime (TPR) in the event of a Hard Brexit is currently under consultation, with final text expected early 2019.
• Also, a second and related consultation is ongoing concerning the application of certain FCA rules to firms in the TPR regime.  Final versions of these rules are expected before exit day.
• The final rule has not yet been published.

Content (as at 28/2/19)

• The TPR can be used by inbound passporting EEA firms and funds, payment and electronic money institutions.
• The TPR can only be used by firms that have submitted a notification (in the required form) to the FCA by the end of 28 March 2019.  Under the TPR, these firms will be able to continue to operate in the UK, whilst providing sufficient time for them to obtain UK authorisation.
• After notification, one of two “landing slots” will be allocated to a firm (either October to December 2019, or during several landing slots from January 2020 and with the last slot closing at the end of March 2021) within which they must submit an application for UK authorisation.

This article was originally published in the February 2019 edition of Osborne Clarke’s EPSM Legal Research Newsletter.