FCA assesses impact of EU Withdrawal Agreement

FCA assesses impact of EU Withdrawal Agreement

The Financial Conduct Authority (FCA) has published its EU Withdrawal Impact Assessment, which was requested by the Treasury Select Committee and sets out the impact of the Withdrawal Agreement and future framework on the FCA's objectives. Andrew Bailey, FCA Chief Executive, has also written to Nicky Morgan MP, Chair of the Treasury Select Committee.

The Treasury Select Committee requested the FCA to assess the impact of the UK's exit from the EU in three areas:

• the UK leaving the EU without an agreement, either on 29 March 2019 or after the transitional or implementation period on 31 December 2020

• the draft Withdrawal Agreement

• the outline of the political declaration on the framework for the future relationship between the EU and the UK

Risks of exiting the EU with no deal

The FCA notes that it takes no view on Brexit, nor does it advocate a particular approach to the withdrawal from the EU. However, it says that exiting with no deal would create 'significant challenges and risks' in terms of firms' readiness, potential market disruption and insufficient public policy solutions put in place by the EU. The FCA therefore strongly supports an implementation period, though it recommends that the duration of the period should be kept to a minimum in order to minimise uncertainty.

The FCA categorises the key consequences of exit without a Withdrawal Agreement into the following areas:

• EU rules cease to apply—the relevant legislation will need to be converted into UK law, with changes to ensure it operates in a UK context

• loss of passporting—while passporting could partially be replaced by equivalence, the FCA's assumption based on the position of the European Commission is that there would not be blanket equivalence decisions that allow for current market access to continue

• the UK and EU's ability to share data may be restricted without reciprocal action by UK and EU authorities

• the FCA has regular supervisory contact with larger firms to ensure they either have contingency plans in place or have decided not to continue to offer services in the EU

• the UK's current regulatory and supervisory cooperation with EU and national authorities under EU law would cease to apply, and the UK would need to rely on the existing third country framework for cooperation instead

• the wider economic situation following exit will have both direct and indirect consequences on the FCA's objectives

The FCA notes that around

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