13/09/2019

European Commission on Brexit: Finalising preparations for the withdrawal of the United Kingdom from the European Union on 1 November 2019

Published: 13 September 2019

On 4 September 2019, the European Commission issued a new communication on the state of preparation for Brexit where actors are informed that they cannot count on a new extension of time that would delay the United Kingdom's withdrawal from the European Union. According to the agreement reached, the deadline for the UK's withdrawal from the EU is 31 October 2019.

With regard to financial services, the European Commission is calling upon insurance companies and other financial service providers to finalise their preparatory measures by 31 October 2019, if they have not done so already.

On 19 December 2018, the Commission adopted a limited number of contingency measures for such a scenario, including two time-limited equivalence decisions, to allow EU27 operators to transfer their contractual relationships to service providers that are allowed to carry out their activities within the EU27. The first of these two decisions allows the European Securities and Markets Authority (ESMA) to recognise temporarily central counterparties currently established in the UK, allowing them to continue providing services in the EU27. It expires on 30 March 2020.

The second one temporarily allows UK central securities depositories to continue providing notary and central maintenance services to operators in the EU27. It expires on 30 March 2021. Additionally, the Commission adopted two Delegated Regulations to allow EU27 operators with outstanding non-cleared derivative contracts to replace UK counterparties with EU counterparties within 12 months of Brexit, without losing the prudential treatment that these contracts currently enjoy.

The Commission’s assessment is that firms providing financial services have largely prepared for a no-deal Brexit, and the Commission, therefore, does not consider that the adoption of additional contingency measures is necessary. It will continue to assess the situation in financial markets after the withdrawal date and decide on the appropriate course of action based on the legislation in force at the relevant point in time, with respect to the recognition of third-country central counterparties.

Given the extreme divisiveness in the UK with respect to Brexit, and in the light of recent developments in the Parliament, it is still difficult to predict the final modality and date of the UK's withdrawal from the EU.

The document is available for download here.

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