The UK’s markets regulator has extended by six months a grace period intended to allow the financial sector to comply with rules that would come into force in the event of a no-deal Brexit in 98 days’ time.
The Financial Conduct Authority said on Thursday that firms now have until December 2020 to get their houses in order to comply with rules that otherwise would immediately take effect if the UK were to crash out of the European Union in October without a deal in place.
The watchdog’s announcement came on the same day as the new prime minister, Boris Johnson, told his Cabinet that he was determined to deliver Brexit by October 31, and that preparations for a cliff-edge exit should be ramped up.
The FCA has completed a massive exercise of “lifting and shifting” Brussels rules and introducing them into domestic legislation but the changes made as a result have a knock-on effect on firms’ reporting systems and so the regulator has given them some breathing space.
Nausicaa Delfas, the executive director of international at the FCA, said: “The temporary transitional power is a key part of our contingency planning if the UK leaves the EU without an agreement. This extension should give firms and other regulated persons the time they need to phase in any regulatory changes they may need to make as a result of ‘onshored’ EU legislation. The power will provide certainty, ensure continuity and reduce the risk of disruption.”
The move extends a previous June 2020 deadline that was announced in February, and the FCA said on Thursday that the extension was in line with the delay of the Brexit deadline from March 29 to October 31.
But for certain rules, there will be no grace period, and firms will have to make sure their reporting systems are compliant by October 31. This includes firms that currently have to report transactions under European rules known as Mifid II and EMIR. The FCA said it needed accurate market data straight away to ensure “ensure market oversight and the integrity of financial markets”.
“If firms are not ready to meet these obligations in full, we will expect to see evidence of why this was not possible,” the FCA warned.
