People at the Financial Conduct Authority’s 2018 asset management conference on Tuesday heard Andrew Bailey, the regulator’s chief executive, appeal to the UK and European governments to preserve the benefits of open financial markets.
“Brexit does not need to be an excuse to restrict trade in financial services. To do so would be a mistake for all sides,” said Mr Bailey.
European managers will be allowed after Brexit to continue to use existing EU “passports”, which permit them to sell products and services to British clients, after the UK government committed in December to a regime of temporary permissions.
No matching offer has been made by Brussels, which is determined to resist UK cherry-picking of the EU single market for financial services.
As a result, the EU passporting framework is expected to end for managers in the UK, which Brussels will treat as a third country after Brexit. Many UK managers have responded by establishing legal entities in Dublin and Luxembourg or by expanding their European operations to continue to serve clients there.
Passporting will end even though Theresa May’s government has pledged to put the entirety of EU law, known as the acquis communautaire, on to the UK statute book.
This task will require thousands of amendments to be made by Westminster before Brexit day on March 29 next year — including replacing numerous references to the European Parliament and European Securities and Markets Authority, the regional regulator — across 20,000 pages of legislation and about 50 European laws that apply to UK financial services companies.
Mr Bailey noted that asset management regulations in the UK and EU would remain fully aligned immediately after Brexit, ensuring that both regimes were “equivalent”. The FCA hopes that Brussels will continue to recognise the UK regulatory regime as equivalent even though differences in rules will emerge over time.
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