Most financial services firms took steps to prepare for Brexit in what, with hindsight, now seems fairly early in the process. Those serving customers based outside of the UK and in the European Community generally took a number of structural steps to ensure they had fully functioning operations, including operating within the relevant regulatory jurisdiction.

Priorities during the transition period

Despite the extent of this forward planning, on 9 October 2020, the Prudential Regulatory Authority and Financial Conduct Authority set out their expectations on how firms should be using the final months of the Brexit transitional period. The regulators flagged the following areas as priorities with the end of the transitional period approaching:

  • Ongoing market access to EC member states – ensuring they are able to meet all the local regulatory and legal obligations.
  • Data transfer – the EC has yet to grant the UK an adequacy decision under GDPR and meantime firms should progress with the insertion of standard contractual clauses in relevant contracts as a way of addressing this. Additionally, firms will need to ensure they are complying with EU law and are clear on any dependencies on EU third parties when transferring data from the European Economic Area (EEA) to the UK.
  • Access to trading venues – as equivalence determinations have not yet been made to ensure reciprocal access to trading venues the regulators have asked firms to update the FCA on their plans to address this including any system and process changes required.
  • Access to payment systems – the processing of payments, including direct debits, will require additional information and the regulators urged firms to take all reasonable steps to prevent disruption.
  • Treatment of retail customers – the ability of UK banks to serve retail customers in the EU may be limited following the end of the transitional period and firms should have plans in place to ensure that they can service existing clients in a way consistent with local regulation. Fair treatment of customers is central to the approach individual firms require to take. This requirement for fair treatment is only highlighted by recent comments by the Treasury Select Committee on the importance of banks giving adequate notice to customers in the EEA should they no longer be able to provide them with retail services.

Additionally, with the current lack of certainty on the future relationship between the UK and the EU in relation to financial services the regulators note the importance of firms using the remaining time to be as prepared as possible. This includes being prepared for potential market volatility at the end of the transitional period, especially in the event of a ‘no deal’. Any volatility as a result of Brexit may result in a cumulative impact for firms to deal with given the disruption that has already occurred in 2020 as a result of COVID-19.

Operational resilience will remain key, particularly should firms be required to make significant operational changes over a short time period. Regardless of whether operational changes are for Brexit, critical change projects or business as usual, it remains important for firms to manage potential risks to protect against outages and disruption to important business services such as payments.

Financial Services Bill

A new Bill designed to ensure the UK’s world-leading financial services sector continues to thrive and grasp new opportunities on the global stage was introduced to UK Parliament on Thursday 22 October.  The Bill will help to enhance the competitiveness of the sector and ensure it continues to deliver for UK consumers and businesses.

We'll provide more insight into what this will mean for the sector as the Bill progresses through Parliament, in the meantime you can read the background on the UK Government's website

In common with other sectors, financial services firms should also look at their supply chain to ensure continuity of supply of key resources. The team at Johnston Carmichael are here to help you prepare. Get in touch with me, Ewen Fleming on: for an initial chat.