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<p>The Government has done the necessary work to make sure that we continue to have
a stable and functioning financial services regime at the point of leaving the EU
in a no deal scenario.</p><p> </p><p>The Government has delivered a programme of legislation
under the EU Withdrawal Act in order to provide continuity for UK citizens and businesses
and to ensure the UK regulatory regime can function effectively outside of the EU.</p><p>
</p><p>This legislation includes temporary permissions for EEA firms currently passporting
into the EU, and temporary permissions to allow UK firms to continue using Central
Counterparties (CCPs) and Central Securities Depositories (CSDs) in the EEA. It also
includes a transitional power for regulators to phase in post-exit regulatory requirements
for firms where they have changed as a result of the UK leaving the EU.</p><p> </p><p>Following
the six-month Article 50 extension, new EU financial services legislation will become
applicable between now and 31 October 2019 and will therefore form part of UK law
on exit day. We are laying further Statutory Instruments under the EU Withdrawal Act
to ensure this new legislation is workable in the UK at exit.</p><p> </p><p>However,
it should be noted that the UK authorities are not able through unilateral action
to fully address all the risks. For example, the risks to EEA customers of UK firms
currently providing services into the EEA using the financial services passport also
require action from the EU or individual member states.</p><p> </p><p>We therefore
welcome the steps taken by the EU and some individual member states to mitigate some
of the risks. This includes: the EU’s temporary equivalence and recognition for UK
CCPs and CSDs; ESMA’s decision to approve Memoranda of Understanding (MoUs) that include
provisions to allow cross-border delegation of portfolio management between the UK
and the EEA; and EIOPA recommendations which call on relevant member state regulators
to put in place measures which aim to minimise detriment to insurance policyholders.</p><p>
</p><p>As a result of all these actions, the Bank of England’s Financial Policy Committee
said in its Financial Stability Report (July 2019): ‘Most risks to UK financial stability
from disruption to cross-border financial services in a no-deal Brexit have been mitigated.’
But they also note that ‘in the absence of further action by EU authorities, some
disruption to cross-border financial services is possible.’</p>
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