Despite the withdrawal agreement having passed through parliament this week, a top UK financial watchdog is warning firms against resting on their laurels to prepare for Brexit.
Nausicaa Delfas, executive director of international at the Financial Conduct Authority (FCA), delivered the warning at an event hosted by London law firm BCLP on Thursday January 23.
She stated that the immediate threat of British financial firms losing their passporting rights at the end of the month had been reduced thanks to the withdrawal agreement passing through parliament.
However, that only meant that Brexit has now entered the next stage in which the UK and the EU must agree what their relationship should look like following the implementation period that ends on December 31, 2020.
Delfas cautioned firms against neglecting to use the transition period wisely.
“Firms still need to ensure they are prepared for a range of scenarios that may happen at the end of 2020 – and this includes the scenario in which the activities they conduct might not be covered by agreements reached between the UK and the EU,” she said.
Delfas added, “Of course, our future trading relationship with the EU is still to be negotiated and agreed, and we are just at the beginning. We stand ready to provide technical advice, in line with our objectives to government on any free trade agreements it negotiates with the EU.”
The FCA executive also lashed out against commentators that suggested that Britain only has two options of how the future relationship with the EU should look like: equivalence with the bloc’s rules or diverging from them.
“The reality is not so binary,” she said. “For countries independently assessing each other for equivalence, they will generally not start with the same set of rules.
“The key question for any assessment of any third country is ‘Do the rules achieve equivalent outcomes?’ As stated in the Political Declaration, both the UK and the EU have committed to outcomes preserving financial stability, market integrity, investor and consumer protection, and fair competition.
“Our work to onshore the EU rulebook means that on day one, the UK will have the most equivalent framework to the EU of any country in the world. This provides a strong basis for the EU and UK to find each other equivalent across the full range of equivalence provisions.
“And in [the] future, it is not about whether we have identical rules, but whether they achieve common substantive outcomes. This is the established model currently used by the EU and it’s an approach we strongly support.”
Delfas stated that the FCA is of the opinion that “equivalence decisions should be based on technical assessments” as laws based on a deep understanding of each other’s regulations would arguably better “ensure stability and transparency for all involved.”
As such, the FCA executive seemed bullish about the two trading blocs coming to an agreement, given that both are “committed to open markets”.
She continued that no matter where the negotiations end, “the FCA will continue to engage with the future EU agenda.”
That being said, some stakeholder may still be sceptical until the upcoming trade agreement has been finalised.
While passporting rights are basically safe until the end of the year, financial firms and FinTech companies are still concerned about what will happen after midnight on New Year’s Eve.
Moreover, the trade negotiations have been off to a rocky start, with UK prime minister Boris Johnson and chancellor of the Exchequer Sajid Javid having both stated that there will be no alignment with EU laws after Brexit. EU politicians have responded that they may switch off London’s access to European markets if British lawmakers fail to see eye to eye with their continental peers.
Copyright © 2018 RegTech Analyst
