PSR’s approach to financial services legislation under the European Union (Withdrawal) Act

The EUWA will repeal the European Communities Act 1972 and convert EU law as it stands at the moment of exit into UK law. It also gives time-limited powers to ministers to make secondary legislation to amend this law to ensure it functions effectively when the UK leaves the EU. These contingency preparations are sometimes referred to as “onshoring”.

HM Treasury will ensure there is a workable legal framework for financial regulation in the UK when the UK withdraws from the EU on 29 March 2019, whatever the outcome of negotiations between the EU and the UK.  

We, like the Treasury, are preparing for a range of potential withdrawal scenarios, including the unlikely eventuality that the UK leaves the EU on 29 March 2019 without a withdrawal agreement and an implementation period having been ratified between the UK Government and the EU.

Treasury plans to lay a number of Statutory Instruments (SIs) before Parliament in due course to make the legal changes required.

In leaving the EU without a deal, many functions currently carried out at an EU level would need to be allocated to the appropriate UK bodies. As part of this onshoring process, the Treasury intends, subject to parliamentary approval, to task the PSR and other financial regulators with amending EU binding technical standards (BTS) and with maintaining those BTS going forward. For the PSR, this relates to the BTS made under the Interchange Fee Regulation. These powers are linked to our role as the main competent authority for the Interchange Fee Regulation in the UK.

The PSR intends to consult on proposed changes to the BTS for which we are responsible in due course.

If an implementation period is put in place, the UK will continue to be treated as part of the EU’s single market in financial services during that period, meaning that EU law will continue to apply in the UK and the UK will continue to implement new EU law that comes into effect during the implementation period. In the unlikely event that an implementation period is not put in place, the changes set out in the SIs, and the PSR’s changes to the BTS, will take effect on 29 March 2019.

What we have been doing

We have been working closely with the Treasury and the other financial services regulators to review EU legislation and domestic legislation we are responsible for to identify deficiencies[1] in such legislation that will arise when the UK leaves the EU.

The immediate aim of this onshoring work is to prepare for the unlikely scenario where the UK leaves the EU without a withdrawal agreement and an implementation period. We expect that much of this work, combined with the outcome of further negotiations with the EU, will contribute towards the legislative framework needed to deliver a smooth and orderly transition to the new regime, which will be agreed as part of the Future Economic Partnership.

The Financial Conduct Authority and the Bank of England have separately set out the details of their approach to financial services legislation under the European Union (Withdrawal) Act (here and here).