As the dust begins to settle after the UK’s shock decision to exit the EU, further uncertainty remains about the future of UK financial services regulation. With many EU regulations and directives deeply ingrained into UK legislation, how this will affect the ability for firms to operate is of growing concern.
The head of France’s central bank, François Villeroy de Galhau, recently stated that UK banks could lose “passporting rights” to the single market as a result of leaving the EU. Mark Simpson, senior associate at financial services legal firm, Baker & McKenzie LLP, said the arrangement with passporting rights is more complex than some politicians have indicated. “If you want to set yourself up with another structure to benefit from passporting, that is not something you can do very quickly.”
However, he added that this is not likely to have any impact in the coming months. Further concerns relate to The Markets and Financial Instruments Directive (MiFID) and Ucits. Both remain pivotal to the UK financial services industry to conduct regulated traded activities within the EU. Particular spotlight is on MiFID, especially as MiFID II and Mifir (regulation) must be transposed into UK law by 3 July 2017.
According to Mr Simpson, the impact could depend on when the UK triggers Article 50 because, from this point, the UK will have two years to finalise the exit.
Under Mifir article 36, the UK could provide equivalence to enable trading as a “third country”, but Mr Simpson said this would not be straightforward. “That framework does not apply everywhere, and it assumes that we would get equivalence on a timely basis which is highly uncertain.”
