The UK regulator has said it will take a “tough, assertive approach” to firms operating in the region with temporary permissions in the wake of Brexit when their deals expire.
In the runup to Brexit, the Financial Conduct Authority set up a temporary permissions regime allowing firms to continue to trade in the country during the transition period, ahead of when the UK would eventually leave the bloc.
Firms in Europe that were previously passporting into the UK when the transition period ended have been allowed to continue operating temporarily in the UK once the passporting regime fell away, as long as they applied before 30 December 2020.
While trading under temporary permissions, firms could seek full authorisation from the FCA or its sister regulator — the Prudential Regulation Authority — to continue to access the UK market going forward.
In March, the FCA began reaching out to firms using the regime to confirm their so-called ‘landing slot’ — the opening and closing dates — for them to either make their case to become permanently regulated in the UK or stop operating in the region by ditching their temporary powers.
Speaking at the regulator’s annual public meeting on 28 September, executive director for markets Sarah Pritchard said that the watchdog would be “taking a tough, assertive approach to those firms that want to continue to operate in the UK continue to meet our standards.”
“For firms that don’t meet [UK standards] or no longer wish to continue to be UK regulated, we will be taking steps to remove their permissions,” she added. “There will be lots of activity in the weeks and months ahead; it’s an important area for us to work not just with government but with firms as they seek to adapt to this new future.”
The comments will add to concerns that many UK financiers have about business heading out of the City and onto the continent in the wake of Brexit.
In the absence of widespread regulatory ‘equivalence’ between the City and its European peers, sectors such as clearing are currently operating on short-term extensions to existing deals.
Leading City figures ranging from former FCA boss Andrew Bailey, now governor of the Bank of England, to International Regulatory Strategy Group chair Dr Kay Swinburne have expressed concern about the uncertainty this is causing markets.
Talking to members of the press after the conference, senior FCA staff said that some 1,500 firms were currently under the temporary permissions regime, and the regulator will have standards that are particularly exacting for those looking to interact with retail clients.
In some areas the regulator had already taken action against firms, for example around firms offering contracts for difference and other high-risk products on a temporary basis, they said.
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