With the three-way stand-off between Westminster, Her Majesty's government and the EU still unresolved, the UK’s financial services sector is focused on the no-deal regulatory regime.
The no-deal regime will involve far greater change for UK regulation than for the EU 27.
For continuing members, a state leaving the EU is much like a state joining on accession but in reverse.
UK regulation must first undergo the onshoring process and modification under statutory instruments (SIs).
Andrew Bailey, chief executive of the Financial Conduct Authority, explained that the onshoring process, which is due to be completed by the end of March, involved 62 SIs.
There is then an extensive transitional regime under those SIs for European Economic Area firms with UK business that will be impacted by the turning-off of passporting under the single market, and on which their current operations rely.
Mr Bailey reminded the Treasury Select Committee that the onshoring process involved modifications where the ‘on-shored’ regulation was "inoperable" as a result of exit.
Recently, the FCA published a press release explaining how it would be using its temporary transitional power under the Financial Services and Markets Act 2000.
The press release said: "We intend to use this power broadly to ensure that firms and other regulated entities can generally continue to comply with their regulatory obligations as they did before exit day for a temporary period.
"There are some areas where it would not be consistent with our statutory objectives to grant transitional relief. In these areas only, we expect firms and other regulated persons to begin preparing to comply with changed obligations now."
The areas where firms need to prepare now for change on exit include: Mifid II transaction reporting; European Market Infrastructure Regulation, or EMIR, reporting obligations; issuer rules; contractual recognition of bail-in; short-selling notifications; use of credit ratings for regulatory purposes and securitisation.
The UK policy on transitional relief for incoming EEA firms is to be as helpful as possible to avoid forcing firms to restructure at an unnecessarily early stage.
On the EU side, turning off passporting and other aspects of regulatory equivalence with the UK is an almost automatic outcome of the UK ceasing to be a member state.
The EU has a clear policy on transitional relief under the no-deal regime. This is the opposite to the UK; the EU’s no-deal regime will not assist incoming UK firms to make the transition after exit.
Despite the potentially very short notice should the withdrawal agreement fall, and therefore of the no-deal regime coming into effect, the EU has taken the position that UK firms must restructure in advance of exit in case the no-deal regime takes effect on March 29.
The EU has been able to maintain a unified position across member states; the no-deal regime transitional relief on the EU side is solely to protect EU 27 interests, and not to assist UK firms.