The UK’s Financial Conduct Authority (FCA) has published information for firms in various sectors about how they will be affected by Brexit, and what actions they may need to take once the country leaves the European Union.
The information is specific to banks, pensions and retirement income firms, general insurance firms, retail firms, and asset managers operating in the UK.
The regulator has also published a series of consultation papers to help ensure a functioning regulatory framework for financial services if the UK leaves the EU without a withdrawal deal or implementation period, also known as a “no-deal Brexit” scenario.
“The FCA has been preparing for a range of scenarios, including the possibility that the UK leaves the EU in March 2019 without an implementation period,” Nausicaa Delfas, executive director of international at the FCA, said in a statement. The documents “ensure that there is a functioning regulatory regime from day one, and that firms are clear as to the requirements they need to meet by end March 2019 and beyond.”
The FCA said that because many UK life insurers write pensions, retirement income, life insurance, and long-term protection business for customers who are based in the European Economic Area (EEA), one of its key areas of focus is making sure these firms can serve their customers in a no-deal situation.
“If you have customers in the EEA, you need to decide on your approach to servicing your existing contracts with them,” said the FCA. “You should take the steps available to you to continue to service customers in accordance with local law and national regulators’ expectations.”
The European Insurance and Occupational Pensions Authority (EIOPA) has published recommendations for the insurance sector regarding the UK’s withdrawal from the EU. The recommendations are addressed to national regulators and are intended to help minimize detriment to policyholders and beneficiaries in a no-deal scenario.
Among its suggestions, EIOPA recommends that life insurance contracts between UK firms and UK-based customers who subsequently move to the EEA, should not be regarded as cross-border business. This includes existing pension contracts in accumulation that contain a right or option for policyholders to realize their pension benefits.
While the FCA said it welcomes this recommendation, it cautioned that firms should be aware that whether they need regulatory permissions in a local EEA jurisdiction will depend on local law and the approach of the local authorities in that jurisdiction.
For UK firms in the banking and payment sectors, the FCA said they should have contingency plans for a range of scenarios, including the possibility that the UK will no longer remain within the geographical scope of Single Euro Payments Area (SEPA). The FCA said firms should take steps to continue to service customers in the in the EEA in accordance with local law and national regulators’ expectations.
“We are clear that firms’ decisions need to be guided by what is the right outcome for their customers,” said the FCA. “In many cases, it would be a poor outcome for the consumer for you simply to stop servicing them, for example, for you to withhold payments to consumers to which they are entitled.”