The EBA’s latest Brexit statement on Wednesday contained familiar reminders and warnings: passporting will end on 31st December 2020 and if UK firms want to offer services into the EU27, they will need to check they are permitted by the relevant local law and whether or not it permits reverse solicitation nor has an overseas persons exemption, etc), and UK firms should not set up brass plate subsidiaries and then sub-contract everything back to the UK, and instead “ensure that associated management capacity, including appropriate technical risk management capabilities, is effectively in place ahead of time, and is commensurate to the magnitude, scope and complexity of their activities, to allow for effective and efficient management of risks they generate”. The concern in Brussels is that this would undermine the single market and a standard application of the rules.
This follows from the EC Notice to stakeholders on 7 July 2020, and the earlier EBA 25th June 2018 Opinion about Brexit, and its 14 July notice aimed at EMIR and derivatives market participants. It notes that attention is required as regards “changing and moving contracts and clients, systemic exposures to UK-based financial market infrastructures and access to funding markets, including possible related capital impacts” and notes that there could be adverse impacts, especially regarding derivatives contracts. What it does not do is offer any help, despite the EC having known of the issues for many months. Its attitude is that the market has had plenty of time to get its house in order but, as readers know, there is more to it than that; but as readers also know, anything it does do will only be at the last minute. A specific warning is addressed to UK-based payment and electronic money institutions, which have apparently been providing many services in the EU27 in reliance on passports. Perhaps it suspects they have been rather slow to come forward.
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