June was certainly an eventful month, with the outcome of the UK’s EU referendum sending shockwaves through the political and financial worlds. We’ve been working through the implications for financial services firms and EU regulation.
Given the leave vote, firms might be tempted to hit the pause button on implementing EU regulatory change, but the reality is they must continue to comply with existing EU regulation and implement any new EU legislation until the point at which the UK formally leaves the EU. To leave, the UK has to trigger Article 50 of the Lisbon Treaty, which starts the clock ticking on the two-year period for negotiating the UK’s withdrawal from the EU. We aren’t yet sure when the UK Government will choose to trigger Article 50 – it could be later this year, or possibly as late as summer 2017.
So we are probably looking at an exit that is at least two to three years away. The likelihood is that most of the key EU financial services legislation that currently is in the legislative process or in the implementation phase will be effective well before the UK exit date. For example, MiFID II comes into effect on 3 January 2018, so firms have to continue their implementation efforts on it.
Post exit, the UK Government will want to take steps to ensure that London remains an attractive financial centre. Perhaps it will consider eliminating or tempering some of the more onerous EU regulatory requirements. But it is going to have to strike a balance – the UK will most likely need to keep the vast majority of regulations in place to ensure it remains equivalent to the EU.
But while firms are working through the implications of Brexit, much of the risk and regulatory landscape remains in ‘business as usual’ mode. And regulators were of course busy with non-Brexit developments in June. The PRA set out its priorities for 2016/17 in its annual business plan and published a policy statement on contractual recognition of bail-in, setting out the final rules and supervisory statement to implementing BRRD.
Meanwhile, MAR took effect on 3 July 2016, introducing new provisions to prevent and detect insider dealing and market manipulation. So firms need to make sure their policies and procedures reflect the new requirements.
Our feature article this month looks at the BMR, which entered into force on 30 June 2016: what the legislation means for benchmark administrators, contributors and users – and why firms should press ahead with implementation plans despite the EU referendum result.