The financial services contracts regime (FSCR) will enable EEA passporting firms that do not enter the temporary permissions regime (TPR) to wind down their UK business in an orderly fashion.
Alongside the TPR, the Government has introduced legislation to create the FSCR which will allow, for a limited period of time, EEA passporting firms that do not enter the TPR to continue to service UK contracts entered into prior to the end of the transition period (or prior to when they enter FSCR) in order to conduct an orderly exit from the UK market once the transition period has ended.
The FSCR will be relevant to EEA firms which passport into the UK if:
- they need to carry out regulated activities in order to continue to perform their existing contracts, but do not to notify us that they wish to enter the TPR, or
- they are unsuccessful in securing authorisation when leaving the TPR but still have regulated business in the UK to run off
If your firm is in the FSCR
Your firm will not be able to write new UK business and will be limited to the regulated activities which are necessary for the performance of pre-existing contracts only, plus certain limited specified activities.
If your firm wants to continue doing new business in the UK after the end of the transition period, or if your firm wishes to have more flexibility in the regulated activities it is permitted to carry on, it will need to enter the TPR and then secure full UK authorisation, if appropriate.
In addition, if your EEA firm manages UK authorised funds, you will not be able to continue to manage those funds after the end of the transition period from within the FSCR. You will need to notify us in order to enter the TPR to benefit from the transitional period. If you wish to continue to market funds in the UK you will in addition need to notify for the TMPR.
The same applies to trustees or depositaries of such funds.
FSCR time limits
The FSCR will be time-limited depending on the type of regulated activity being performed. It will apply for:
- a maximum of 15 years for insurance contracts, and
- 5 years for all other contracts
These periods are maximum periods and a firm’s permission (or exemption) under FSCR applies only to the extent that it is necessary for the performance of a pre-existing contract plus certain limited specified activities.
In addition, we will expect firms in the regime to run down their business in an expedited manner.
The Treasury can extend these periods, if necessary, based on a joint assessment by us and the PRA.
Supervised and contractual run-off
Firms in the FSCR will have to keep their authorisation in their home state and must notify us if their authorisation is cancelled or varied.
The FSCR will provide 2 discrete mechanisms:
- supervised run-off – for EEA firms with UK branches or top-up permissions in the UK, and firms who entered the TPR but then did not secure a UK authorisation, or
- contractual run-off – for remaining incoming cross-border services firms
In our Policy Statement PS19/5 we set out how we will implement the FSCR.