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Financial services and market infrastructures & Brexit

In the case of a disorderly Brexit, financial services transactions with the United Kingdom in the EU (and the United Kingdom) will as a rule be subject to the same rules as other third countries.

Information for financial services companies and market infrastructures

1. General information

In the area of financial services and market infrastructures, after a disorderly Brexit the United Kingdom will have to be treated as a third country. In the relevant national legislation (Austrian Banking Act, Austrian Insurance Supervision Act, Austrian Securities Supervision Act 2018, Austrian Financial Markets Anti-Money Laundering Act 2018, Austrian Investment Fund Act, Austrian Bank Recovery and Resolution Act etc.), Financial Market Authority regulations and EU legislation – unless otherwise specified – references to third countries are to be read in such a way that they include the United Kingdom.

In turn, all the preferential provisions that can be claimed only in relation to EU/EEA countries will no longer apply to transactions that take place with the United Kingdom after the entry into force of Brexit.

Financial services companies and market infrastructures are advised to find out what steps need to be taken to prepare adequately for Brexit – see also: General information from HM Treasury on a disorderly Brexit

Financial services companies and market infrastructures currently operating through the freedom to provide services and the freedom of establishment between the UK and another EU Member State will at any rate be affected by Brexit. This concerns in particular the following:

  • Companies and funds established in the UK and engaged in business activities in the EU.
  • Companies and funds established in an EU Member State and engaged in business activities in the UK.

2. Preparation of financial services companies and market infrastructures for Brexit

Financial services companies and market infrastructures should prepare adequately and comprehensively for the opportunities and risks of Brexit in accordance with relevant legal materials in order to reflect, manage and limit potential risks.

Further details on the requirements and expectations of key national and international stakeholders vis-à-vis EU financial services providers and information on the operationalisation of these expectations can be found in public announcements and publications of the Financial Market Authority (FMA), the Central Bank of Austria (OeNB), the European Commission (EC), the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), the European Insurance and Occupational Pensions Authority (EIOPA), the European Central Bank (ECB) and the Single Resolution Board (SRB). For specific questions on the legal interpretation, it is recommended to contact the competent authorities directly, in particular the Financial Market Authority (FMA), the European Central Bank (ECB) or the Single Resolution Board (SRB).

The supervisory authorities are also required to review the adequacy of the preparation of financial services companies and market infrastructures for Brexit. For example, the European Central Bank lists as one of its priorities for 2019 the review of the appropriateness of the bank’s internal preparation plans for Brexit: Brexit preparation as priority of the ECB for 2019

The European Commission has published information to help better assess the consequences of Brexit in the financial sector (see: European Commission).

3. Cushioning of Brexit through various measures on the part of the EU

The European Commission, the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have published measures that are intended to ensure the functioning of financial market infrastructures even in the case of a disorderly BREXIT. In addition to temporary and conditional recognition of Central Counterparties (CCPs) and Central Securities Depositories (CSDs) – if and insofar as necessary to avoid risks to financial stability –, temporary exemptions from the clearing obligation and from margin requirements in the event of a transfer of derivatives from a British counterparty to an EU 27 counterparty are planned.

4. Brexit cushioned by various measures taken by the United Kingdom

The HM Treasury has published information on how HM Treasury, e.g. through the European Union (Withdrawal) Act, intends to contribute to ensuring a functioning regulatory framework for financial services in all withdrawal scenarios:

The British Financial Conduct Authority (FCA) has, among other things, published guidelines for companies to help them prepare for the UK’s withdrawal from the EU:

5. Temporary permissions

For financial services companies of the EU and EU funds that have relations with the UK, particular attention should be paid to the option of temporary permissions. This option is of particular importance in the case of a disorderly Brexit, since only such a permission makes it possible to temporarily continue the business activities within the framework of existing permits after the withdrawal of the United Kingdom. Likewise, EU funds can only continue to be marketed in the United Kingdom if such a permission has been obtained.

The FCA Connect system can also be used to submit various related applications and notifications or adjustments.

The Bank of England (BoE), the central bank of the United Kingdom, provides information on registration for EEA banks and EEA insurance companies. Only with the BoE’s temporary approval will it be possible for EEA banks and EEA insurance companies to exercise the freedom to provide services and the freedom of establishment for a limited period after the withdrawal of the United Kingdom mostly in line with the previous regime in the United Kingdom.

6. Branches in the United Kingdom

Companies wishing to establish or maintain a branch in the UK in the event of a disorderly Brexit are required to obtain a permission by the Financial Market Authority (FMA) or European Central Bank (ECB) and should contact these institutions accordingly. 

7. Information obligations of financial services companies

The central EU supervisory authorities and standard setters EBA, ESMA and EIOPA draw attention to the importance of comprehensive and correct information for customers and formulate expectations for national and EU supervisory authorities with regard to the information obligation of financial services companies vis-à-vis their customers.

Thus, for example, the European Banking Authority (EBA) expects financial services companies to inform their customers about the following issues:

  • The specific impact of Brexit on affected customers;
  • measures taken by the company to prevent adverse effects;
  • any restructuring and preparatory activities of the company, in particular any relevant changes to the terms of the contract (e.g. in relation to the Deposit Guarantee Scheme); and
  • contractual and statutory rights of affected customers.

The Austrian legislator has also implemented an obligation on insurance companies established in the United Kingdom to ensure that policyholders are also informed of the effects of the withdrawal of the United Kingdom from the European Union before the conclusion of any contract and during the term of the insurance contract, and that this information is updated without delay if necessary.

8. Financial services contract regime

The Bank of England’s (BoE) Financial Services Contracts Regime is designed to ensure that those EEA financial services companies that do not enter the temporary permission regime (TPR) and those that leave the TPR  without UK authorisation are able to wind down their UK regulated activities in an orderly manner.

Information from the Bank of England on the Financial Services Contracts Regime 

In principle, however, in contractual relations between the EU and the UK the loss of access to the freedom to provide services and the freedom of establishment in the EU due to Brexit may affect the continuity of contracts. For contracts governed by or providing for the applicability of the laws of the UK, or containing an agreement on the jurisdiction of a court in the UK, the parties should examine the effect of Brexit on the validity and enforceability of such contracts, and limit potential risks, including those of their customers.

9. Financial market infrastructures

The British central bank, the Bank of England (BoE), provides information on the effect of Brexit on financial market infrastructures in general and on the specific approach to a possible recognition of non-British financial market infrastructure companies:

10. British financial services companies in Austria

In connection with the possible relocation of British financial services companies to Austria or other issues relating to the freedom to provide services or the freedom of establishment of British companies doing business with Austria, the Federal Ministry of Finance recommends contacting the Financial Market Authority (FMA) or the European Central Bank (ECB) directly.

11. Transfer of Data

Financial services companies need to clarify whether a transfer of personal data with the United Kingdom takes place. Pending final clarification by the relevant authorities, the following points in particular should be kept in mind:

  • The extent to which your business is dependent on the transfer of personal information (e.g. the location of databases and data processing centres);
  • What specific risks your company is exposed to if no comprehensive central solution is found for the transfer of personal data with the UK, and what measures need to be taken to address these risks.

Information for citizens

1. General information

The United Kingdom and the relevant EU stakeholders, including the Federal Ministry of Finance (BMF), the Financial Market Authority (FMA) and the Central Bank of Austria (OeNB), are committed to ensuring a fully operational framework for financial services and market infrastructures at the time of Brexit and thereafter within their respective spheres of competence. For most Austrians, Brexit will have no direct impact.

Financial services companies and market infrastructures that currently have commercial activities with the United Kingdom through the exercise of the freedom to provide services and the freedom of establishment will at any rate be affected by Brexit. This concerns in particular the following:

  • Companies and funds established in the UK and engaged in business activities with the EU.
  • Companies and funds established in an EU MS that have business activities with the UK.

If customers have business relationships with such companies or funds, direct or indirect effects are possible. If you would like to check whether your financial services company is subject to UK supervision, you can do this by, for example, consulting the British Financial Services Register, by checking your correspondence with the company, the company website, or by contacting the company directly.

Cost increases in some areas are possible with Brexit. For example, UK-based payment service providers may lose direct access to central payment infrastructure, such as TARGET services, in the case of a disorderly Brexit. For consumers having an account with a British bank, this could mean slower payment processing or higher costs in connection with payment processing. The cost of credit card payments may also rise.

2. Information from banks, insurance companies, pension funds and investment firms

Financial services companies were urged by the EU supervisory authorities and standard setters for banks, insurance companies, pension funds and investment firms EBA, ESMA and EIOPA to inform their customers affected by Brexit about the following facts:

  • The specific impact of Brexit on affected customers;
  • measures taken by the company to prevent adverse effects;
  • any restructuring and preparatory activities of the company, in particular any relevant changes to the terms of the contract (e.g. in relation to the Deposit Guarantee Scheme); and
  • contractual and statutory rights of affected customers.

The Austrian legislator has provided an obligation for insurance companies established in the United Kingdom to ensure that policyholders are also informed of the effects of the withdrawal of the United Kingdom from the European Union before the conclusion of any contract and during the term of the insurance contract, and that this information is updated without delay if necessary.

3. Information collection

Customers of financial services companies who have business relationships in the United Kingdom or who reside in the United Kingdom, or who have entered into contracts under British law, should actively contact these financial services companies in order to assess and limit possible current or future risks.

4. Preparation of financial services companies and market infrastructures 

See the remarks under Item Preparing financial services companies and market infrastructures for Brexit