It is important that UK firms have considered how the end of the transition period may impact their business and their customers. This page sets out some considerations to help UK firms consider if or how they will be affected and what action they may need to take.
How firms are affected at the end of the transition period will depend on a number of factors, including the nature of their business, the location of their customers, and any agreements or decisions about the future UK-EU relationship, for example whether a free trade agreement is reached or equivalence determinations are made.
Until the position is clearer, we expect firms to continue to consider the implications of a range of scenarios, including the possibility that the UK and the EU do not conclude a free trade agreement or make any equivalence determinations before the end of the transition period.
The following questions may help you decide whether you conduct business in the EEA and if your business might be affected at the end of the transition period. This is not a full checklist.
- Do you currently provide any regulated products or services to customers resident in the EEA? For example, you might provide financial advice to EEA-based customers. Or you might have insurance contracts either with EEA-based customers or which cover risks located in the EEA which require regulatory permission in that country in order to be serviced.
- Do you have customers or counterparties based in the EEA, including UK expatriates now based in an EEA country?
- Are you marketing financial products in the EEA? This includes products marketed on a website aimed at consumers in the EEA.
- Do you have agents in the EEA or interact with any intermediary service providers in the EEA? For example, you may use an insurance intermediary to distribute products into the EEA.
- Does your firm transfer personal data between the UK and the EEA or vice versa?
- Does your firm have membership of any market infrastructure (trading venues, clearing house, settlement facility) based in the EEA?
- Are you part of a wider corporate group based in the EEA, or does your firm receive any funding from an entity in the EEA?
- Do you outsource or delegate to an EEA firm or does an EEA firm outsource or delegate to you?
- Are you party to legal contracts which refer to EU law?
If any of these apply to you – or you currently conduct business in the EEA in any other way (or might in the future) – then you should think about the legal basis on which that business occurs and how that might change at the end of the transition period. This includes thinking about whether your firm will need additional regulatory permissions in the UK and/or in another country.
Passporting between the UK and EEA states will end at the end of the transition period. If your business currently takes place based on a passport then you will need to consider if and on what basis it may be possible to continue after the end of the transition period. You can find out if your firm uses a passport by checking the Financial Services Register.
Not all these factors will automatically mean your business or your customers are impacted. This will depend in part on the nature of the future relationship between the UK and the EU. There are other ways firms can access the EEA which may not be affected by the end of the transition period, although these will depend on the specific firm, type of activity and the exemption or local permission in question.
- permission under local law or based on rules of a local financial market infrastructure
- local exemptions in an individual EEA country
- whether reverse solicitation is permitted without local authorisation – this is where the client initiates the provision of the service on their own initiative, and you do not promote or advertise services
- whether your activity would potentially be covered by any prospective EU equivalence decision on a specific aspect of the UK’s regulatory framework
Servicing your EEA customers
With passporting ending at the end of the transition period, you should prepare for a range of scenarios, including the possibility that the activities you conduct might not be covered by any arrangements which may be agreed between the UK and the EU.
You will need to consider how the end of the transition period will affect you and your customers, and what action you may need to take to be ready for 1 January 2021. If you are servicing customers based in the EEA, this will include taking the steps available to you to continue to service them, following local law and local regulators’ expectations.
We are clear that firms’ decisions need to be guided by what is the right outcome for your customers. You must treat customers fairly, irrespective of where they are based. In many cases, it would be a poor outcome for customers if you simply stop servicing them suddenly. There will be particular situations where significant harm would result – for example, if you withheld payments to which customers are entitled.
You should think about how your outsourcing and third-party relationships will be affected at the end of the transition period. You should also consider the associated operational risk to your firm and potential harm to consumers that may result from any change or disruption to the outsourced services they provide.
You should have a clear understanding of your firm’s dependencies on outsourcing or third-party service providers so you can assess whether they will be able to continue providing their services after the transition period.
The following questions may help you decide how the end of the transition period might affect these arrangements. Please note that this is an indicative list.
- Have you identified your key third-party service providers?
- Have you considered if these service providers will be materially affected by the end of the transition period?
- Have you and your third-party service providers discussed your respective plans for the end of the transition period, to ensure that they can continue to service you?
- Have you considered the potential demand for change management resources at critical service providers (arising from more than 1 client making increased demands upon the service provider)?
Engaging with non-UK regulators
As part of your preparations during the course of this year, you may need to discuss your plans with European regulators to ensure that you will be ready and able to continue to provide services to EEA customers when the transition period ends.
Similarly, European regulators are making their own preparations and are contacting firms directly about their intentions. In the same way that firms deal with us, firms should act lawfully and respond to our counterpart regulators as best they can and in a timely manner.
Information for your sector
- General insurers and intermediaries in the UK
- Life insurers in the UK about pensions and retirement income
- Participants in the wholesale markets operating in the UK (including wholesale banks, wholesale markets and asset managers)
- Retail investments firms in the UK
- Banking and payment sectors in the UK