The UK has left the EU: What does this mean for financial services?

The UK has left the EU: What does this mean for financial services?

 

The UK left the EU on 31 January 2020 and has now entered into an implementation period that is due to end on 31 December 2020. During that time, the UK will remain subject to EU financial services legislation, and EU passporting arrangements will continue to apply in the UK. This analysis considers what Brexit means for financial services during the implementation period and beyond.

 

We are now in an implementation period. What happens now?

 

During the implementation period, which is referred to as a ‘transition period’ in the Withdrawal Agreement between the UK and the EU, the UK will negotiate its future relationship with the EU. Under the terms of the Withdrawal Agreement, the transition period can be extended once by up to one or two years, if the UK and the EU agree to an extension before 1 July 2020. For more information on the Withdrawal Agreement, see the LexisPSL Practice Note: Brexit—introduction to the Withdrawal Agreement.

During this time, the UK will continue to be treated by the EU as a Member State for many purposes. While it will not participate in the political institutions and governance structures of the EU, the UK must continue to adhere to its obligations under EU law (including EU treaties, legislation, principles and international agreements) and submit to the continuing jurisdiction of the Court of Justice of the European Union, in accordance with the Withdrawal Agreement.  

This means that EU passporting arrangements will continue to apply in the UK during the implementation period, and UK firms will remain subject to EU financial services legislation. EU regulations will continue to have direct effect in the UK, as will guidelines issued by the European Supervisory Authorities (ESAs)—the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA).

New EU legislation that takes effect before the end of the implementation period will also apply to the UK. UK

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About the author:

Chris is a member of the New York Bar with more than two decades of experience as a financial services and capital markets lawyer in London. Before joining LexisNexis in 2016, Chris worked as a Senior Professional Support Lawyer at Linklaters LLP, supporting the firm’s market-leading Financial Regulation Group, with a particular focus on MiFID II. Chris also worked as Legal Analyst at Bloomberg, where he drafted analytical articles on EU, UK and US financial services law and regulation for Bloomberg journals and developed practical guidance content for the award-winning Bloomberg LAW legal research platform. Prior to that, Chris was a partner in the U.S. law group at Allen & Overy, advising issuers and underwriters on a wide range of capital markets and corporate finance transactions including SEC-registered and Rule 144A debt and equity offerings and mergers and acquisitions, as well as providing general U.S. securities law advice. He also co-founded the firm’s Microfinance Working Group and advised on a variety of matters including two landmark securitisations of loans to microfinance institutions.

Chris has written extensively on legal and regulatory issues for numerous publications and lectured on financial regulation, microfinance and capital markets.