Following a decade-long bombardment, the landscape of financial regulation has been pushed even further into the deep by Brexit: a labyrinth of legal, economic and political factors amalgamating over a divided nation.
But look closer and you may find confusion slowly clearing. Despite the complicated nature of the regulatory outlook, the UK Government and relevant regulatory bodies have allowed a trickle of crucial information into the public sphere:
- the UK Government has, through the European Union Withdrawal Act, ensured the adoption of EU Law onto the Statute Book at both Level 1 (Specific Legislation) and Level 2 (Regulatory & Implementation Technical Standards). This will essentially mean compliance for the third-country application(s), allowing financial services unfettered access in specific areas under specific regulations (each of which requires a separate application under current third-country equivalence procedures);
- the FCA has further endorsed this line of thinking, stating they expect financial institutions to follow ESA guidelines, though this shall not be legally binding and calls into question the future of SFTR and Level 3 measures i.e. reporting instructions
- it was also confirmed that trade repositories would be required to be registered and authorised by both the FCA and/ or ESMA to provide services in those jurisdictions, with a clear distinguished transaction reporting strategy for EEA firms and UK branches;
- and the FCA itself will be assuming a more pro-active role following Brexit. This will include, for example, having the power to provide greater flexibility over the implementation of market regulation. While there will be regulatory alignment with the EU in the short-term, UK firms may expect some understanding over its implementation and remediation.
For firms this means a clear revision of their reporting arrangements – in both cases. For the FCA, it means having the capability to crunch data, ready to publish.
Of course, there is a downside. Despite this progress, much of the work remains to be done. With only weeks remaining, the burden on individual financial institutions is likely to be large as they seek to bridge the gap between current and future states.
You can also read my previous Brexit blog here and sign up to receive regular updates from Catalyst using the form below.