Hard Brexit: National legislative initiatives under banking and finance regulatory law

Various EEA states have published draft laws or other initiatives with respect to banking and finance regulatory law in order to be prepared for the occurrence of a Hard Brexit. Which approaches are taken by national legislators in particular EEA states? The following overview provides some basic information about the content and status of such EEA states’ initiatives.


Brexit related measures (as at 30/6/19)

  • Law approved by the Belgian Parliament, however the text remains to be published in the Belgian Official Gazette.

Content (as at 30/6/19)

  • On 28 March 2019, a law with certain temporary measures to address a potential hard Brexit has been approved be the Belgian Parliament under the emergency procedure
  • In practice, the law in itself does not provide any concrete measures for regulated entities but it empowers the Belgian Government to adopt measures regarding financial entities (including payment institutions and e-money institutions) in order to “ensure the continuity of the contracts entered into by those entities with the Belgian customers”. According to the law, these measures may include temporary authorisation to continue to provide services but only to the extent necessary for the continuity of existing contracts. The content of the measures that the Belgian Government intends to adopt is not known yet.


Brexit related measure (as at 30/6/19)

  • An “empowerment Law” was adopted on 17 January 2019 by the French Senate to enable the government to adopt measures to take transitional measures in the event of hard Brexit. The government is planning on adopting several ordinances to implement measures to anticipate the consequences of a hard Brexit.
  • Five different ordinances and associated decrees that apply to the various economic and social sectors potentially impacted by a hard Brexit to ensure “the continuation, on French territory, of economic activities related to the United Kingdom” have been adopted.
  • The ordinance related to financial services has been published on the French Official Journal dated 6th February 2019.
  • A new Ordinance no 2019-236 dated 27 March 2019 has been adopted to amend Ordinance no 2019-75 dated 6 February 2019 on measures to prepare for the United Kingdom’s withdrawal from the European Union in the field of financial services
  • One Decree and two Arrêtés have been adopted on 22 March 2019:

– Decree no. 2019-224 of 22 March 2019 on the approval of interbank settlement systems or systems for the settlement and delivery of financial instrument s governed by the law of a third country provided for in Article L. 330-1 of the Monetary and Financial Code

– Arrêté on the information of insured persons and subscribers by foreign companies (“Arrêté 1“)

– Arrêté determining the transitional period granted following the withdrawal of the United Kingdom form the European Union referred to in Article 4 of the Ordinance 2019-75 on measures to prepare for the withdrawal of the United Kingdom from the European Union in the field of financial services (“Arrêté 2“)

Content (as at 31/5/19)

  • The ordinance on Financial services contains provisions related to

– the access by French entities to interbank settlement and delivery settlement systems in third countries, including the United Kingdom, by ensuring the definitive nature of settlements made through these systems and the designation of a competent authority to supervise securitisation-related activities and

– the uninterrupted use of framework agreements concerning financial services and the securing of the conditions for the execution of contracts entered into prior to the end of the recognition of British entities’ licences in France.

  • The head of the ACPR (Mr. François Villeroy de Galhau) has also mentioned that the ACPR will propose “the implementation of an appropriate transitional regime for the extinctive management of contracts which allows British companies to continue their activities initiated under the European passport, provided that they submit a liquidation programme to the ACPR”.
  • The purpose of the new Ordinance is to take into account the postponement of the effective date of Brexit. The date of entry into force of the measures provided for in Ordinance 2019-75 shall be postponed to the date of “withdrawal of the United Kingdom from the European Union without agreement concluded in accordance with Article 50 of the Treaty on European Union”.
  • The Decree sets out the procedure applicable to the approval of interbank settlement systems or systems for the settlement and delivery of financial instruments governed by the law of third country.
  • Arrêté 1 specifies the conditions for communicating information to insured persons and subscribers to insurance contracts with foreign companies no longer able to issue new policies or renew the agreement and on the date of the end of warranties.
  • Arrêté 2 on financial services does not contain measures applicable to EMIs or PSPs and only contains the following set of measures:

– A first set of measures applies to the equity saving plan (“PEA“) and the equity savings plan for financing small and medium-sized enterprises and mid-cap companies (“PEA-PME“) and provide that UK securities and units shall remain eligible to PEA and PEA-PME for a period of 15 months after the date of a no deal Brexit

– Another set of measures concerns private equity funds and provides that securities admitted to trading on a United Kingdom market will remain eligible to mutual and collective funds.


Brexit related measure (as at 30/6/19)

  • Germany has adopted the Brexit-StBG which has entered into force on 29 March 2019.

Content (as at 30/6/19)

  • Brexit-StBG covers all payment services and e-money business as defined in the German Payment Supervisory Act (ZAG) (transposing PSD2 and EMD2 into German law)
  • In the event of a Hard Brexit, BaFin may order that the provision concerning the European Passport be applied in whole or in part for a transitional period after Brexit were established in Germany via a branch office or by way of providing cross-border payment services or e-money business.
  • (Continued) use of the European Passport must be granted by BaFin
  • Use of the European Passport may be limited to certain business. BaFin may consider which particular payment services or the e-money business it allows the UK entity to continue in Germany
  • Decision of BaFin must be necessary in order to avoid disadvantages to the functioning or stability of the payment services markets
  • Provision of payment services or e-money business must be closely related to contracts existing at the time of withdrawal. Presumably no acquisition of new customers possible. New business with existing customers must presumably have a close connection with existing business with that customer
  • The transitional period may not exceed 21 months


Brexit related measure (as at 30/6/19)

  • Italian Decree No 22 dated 25 March 2019 (“Italian Brexit Decree”) concerning the rules applicable to the UK payment service providers operating in Italy at the date of the withdrawal.

Content (as at 30/6/19)

  • During the period between the date of the withdrawal and the end of the 18th month thereafter (“Interim Period”), amongst others,

1. UK banks (that provide services under the right of establishment through branches or under the right of freedom to provide services) and

2. UK electronic money institutions (that provide services under the right of establishment through branches)

may continue to operate in Italy, subject to prior notification to the Bank of Italy.

  • Notification must be made no later than 3 working days before the date of the withdrawal. Otherwise such entities must cease their activities as described below.
  • The UK payment service providers referred to above, which intend to continue their business in Italy after the end of the Interim Period, must submit, within a maximum period of 6 months from the start of the Interim Period, the relevant application for the authorisation to carry out their activities in Italy or the request to be authorised as Italian payment service providers. Otherwise, such entities have to cease their activities as described below.
  • UK payment institutions (generally) and UK electronic money institutions (operating in Italy either under the right of freedom to provide services or through agents or contracted persons) must cease carrying on business in Italy before the date of the withdrawal; without prejudice to the operations necessary for the orderly termination of the relationships already in place but, in any event, these operations must not continue beyond the maximum period of 6 months from the withdrawal date (“6 Month Period”).
  • UK payment institutions and UK electronic money institutions had to inform their clients of the actions adopted to ensure the orderly termination of the relevant activities by 10 April 2019


Brexit related measure (as at 30/6/19)

  • Legislative proposal with transitional provisions for a Hard Brexit (“Verzamelwet Brexit“); not entered into force yet; approved by the Dutch House of Representatives on 29 January 2019.
  • Transitional regime regarding the right of residence of UK citizens in the Netherlands.
  • Amendment to the Exemption Regulation under the Financial Supervision Act (“Vrijstellingsregeling Wft“).

Content (as at 30/6/19)

  • The Verzamelwet Brexit does not specifically relate to provision of regulated services. Based on this act, measures can be taken by governmental decree or for reasons of urgency by ministerial regulation (e.g. by the Minister of Finance) to deviate from an act of parliament insofar this is necessary in the light of preventing unacceptable consequences of the Brexit. Until six months after the Brexit, (transitional) measures can be taken on the basis of the Verzamelwet Brexit.
  • Based on the transitional regime regarding the right of residence of UK citizens in the Netherlands, UK citizens and their family members that reside legitimately in the Netherlands prior to Brexit on 29 March 2019 will be allowed to reside, work and study for at least 15 months in the Netherlands in case of a Hard Brexit.
  • On the basis of the amendment to the Exemption Regulation under the Financial Supervision Act, investment firms that provide investment services on a cross-border basis from the UK in the Netherlands to professional clients and eligible counterparties or trade on own account with such parties are temporarily exempted from the authorization requirement. This temporary exemption applies until 1 January 2021 and will only come into force in case of a Hard Brexit.


Brexit related measure (as at 30/6/19)

  • A measure (Royal Decree-law 5/2019, of 1 march, adopting contingency measures for the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union without reaching the agreement foreseen in Article 50 of the Treaty of the European Union) has been approved by the Spanish Government and, even if it does not deal specifically with EMIs and PIs, the Spanish Ministry of Economy published a FAQ where it is stated that EMIs and PIs are comprised by the measure.

Content (as at 30/6/19)

  • Through the text –which will need to be validated by the Permanent Commission of the Spanish Parliament– it becomes apparent that the main aim of this piece of legislation is the continuity of the legal reality pre-Brexit to the maximum extent possible with due regard to certain warranties
  • The provision of financial services is one of the areas covered by the Royal Decree-law. The Royal Decree-law focuses on the continuity of customer contracts for the provision of banking, securities and any other banking services after the effective date of withdrawal of the UK. Without prejudice to that, an authorised entity established in the UK or Gibraltar will be able to continue to provide its services within the Spanish territory. However, said entities would be subject to the third-country regime and would need a new authorisation if they wish to extend the contracts that are about to expire or modify them in a way such that entails the provision of new services in Spain or may affect the essential obligations of the parties.
  • The Royal Decree-law establishes a provisional period of nine months –following the withdrawal of the UK from the EU– in which authorisations granted by a British authority may continue to be valid in Spain in relation with the management of the contracts entered to before the withdrawal if such management requires being authorised. This provisional authorisation validity for said management of the contracts shall have the sole purposes of (i) carrying out an orderly termination or assignment of the relevant contracts, and (ii) requesting an authorisation under any of the legal regimes available, including by setting up a subsidiary.
  • In the case of a hard Brexit scenario, the Bank of Spain, the National Securities Market Commission and the General Directorate of Insurance and Pension Funds will assume a significant role within their respective scope of competence. These authorities will be in charge of implementing the provisions of Royal Decree-law 5/2019 in relation to financial matters. On the one hand, these authorities may require to British financial services providers any information, documentation or even the adoption of whatever measures may seem necessary to continue to provide their services in Spain. On the other hand, they shall adopt whatever measures may be necessary to protect affected customers and ensure an adequate framework of legal certainty.


Brexit related measure (as at 30/6/19)

  • Final instruments, rules and guidance for a Temporary Permissions Regime (TPR) in the event of a hard Brexit were published by the FCA on 29 March 2019 and, following the agreement between the UK Government and the European Council on 11 April to delay the UK’s departure to no later than 31 October 2019, and in light of the current delay to the process of the UK’s withdrawal from the EU, an update to the FCA’s TPR guidance webpage was made on 24 May 2019. The FCA will provide further updates when necessary on its website and through other channels.

Content (as at 30/6/19)

  • The TPR can be used by inbound passporting EEA firms and funds, payment and electronic money institutions.
  • The TPR can only be used by firms that have submitted a notification (in the required form) to the FCA by the end of 30 October 2019 (the FCA has extended the notification window for firms who wish to enter the TPR from 30 May 2019, 11 April 2019 and, the original date prior to that, 29 March 2019). Under the TPR, these firms will be able to continue to operate in the UK, whilst providing sufficient time for them to obtain UK authorisation. If the UK leaves the EU without a deal, the TPR will come into force on 30 October 2019 at 11p.m.
  • It is not currently possible for EEA authorised payment institutions, EEA registered account information service providers and EEA authorised electronic money institutions to notify the FCA that they want to use the TPR. The FCA will update its website and issue further directions when the FCA is again able to accept notifications from these firms.
  • The FCA will keep the notification window for the temporary permissions regime under review. It will communicate further changes as appropriate.
  • After notification, ‘landing slots’ setting out a period within which firms need to submit their application for UK authorisation. Originally, the FCA planned to allocate one of two ‘landing slots’ to a firm (either October to December 2019, or during several landing slots from January 2020 and with the last slot closing at the end of March 2021) within which they must submit an application for UK authorisation. In light of the current delay to the process of the UK’s withdrawal, confirmation of the timing of the landing slots will take place after exit day.
  • If a firm wishes to withdraw its TPR notification before exit day, it must do so in writing and in accordance with the supplementary directions on the FCA website.
  • For payment and electronic money institutions, after notification under their TPR (for “transitional authorisation”) they must notify the FCA within 12 months of exit day if they intend to apply for authorisation. The regime is expected to be in place for a maximum of three years from exit day. (The period will vary from firm to firm depending on when they are asked to submit their full application in the UK)
  • The final rules and guidance that will apply to firms under the TPR are set out in the FCA’s Policy Statement PS19/5. Details of firms with temporary permission will be shown on the FS Register. Firms in the regime will be subject to the rules on the basis set out in PS19/5 from exit day. HM Treasury has also put forward legislation which gives the FCA with power to phase in post-exit requirements (e.g. granting ‘relief’ or flexibility for firms and funds to transition to a fully domestic UK regulatory framework). Where the FCA has used this transitional power more generally to provide some relief under the rules, this same relief will also be available to firms and funds under the TPR.
  • Any EEA passporting firm that does not notify the FCA of its wish to enter into the TPR, and who has pre-existing contracts in the UK which would need a permission to service, will automatically be put into the Financial Services Contracts Regime (FSCR). This will allow the run-off of existing contracts but no new business can be undertaken.


This article was originally published in the June 2019 edition of Osborne Clarke’s EPSM Legal Research Newsletter.