The majority of the UK’s financial services legislation comes from EU directives. These allow banks and other financial services firms to offer banking, saving or lending services across the EU without needing to be regulated by each individual country’s financial regulator.
It means that, for example, RCI Bank and Ikano Bank – regulated by the French and Swedish regulators – are able to offer savings accounts to UK customers.
The UK is also covered by other regulation, for example making payments to Euro-area countries swift and easy, and banning retailers from charging users if they pay for an item using a credit or debit card.
- In the event of NO deal… the Government will try to put temporary arrangements in place. The Government proposes a ‘Temporary Permissions Regime’ that will allow firms already authorised to operate financial services in the UK to continue to do so for three years after the UK leaves the EU.
The idea is that this grace period will allow these firms to seek authorisation from the relevant UK regulator to continue to do business in the UK, or wind up their UK businesses in an orderly way, and that there will therefore be no immediate withdrawal of banking or payment facilities on 29 March 2019.
This temporary regime would also cover investments, prepaid cards, international money transfer firms and other payment service providers.
The Government’s paper stresses that for UK-based customers of UK-based banks or other financial firms there’s likely to be little change – for example, the Bank of England has confirmed that the £85,000 savings safety guarantee in the UK will remain after Brexit, though the amount covered could be changed later by the Bank.
If you do save with a bank like Ikano, RCI or Fidor, then it’s uncertain if your protection will continue – though it’s possible at least while the ‘Temporary Permissions Regime’ is in place. If your protection does change, your bank would have to notify you in good time, which would give you time to withdraw your cash.
People or businesses regularly sending or receiving euros could see a delay in transfers, as the UK would most likely need to leave the Single Euro Payments Area (SEPA).
- If there IS a deal… little is likely to change. It’s expected that nothing will change in financial services during the two-year transition period. It’s then also likely that the ‘no deal’ proposals will kick in, as the UK Government is not seeking to remain in the single market or the European Economic Area. As it stands, financial firms in countries outside of those blocs are unable to ‘passport’ financial services in to the EU.
Additional reporting by Callum Mason, Helen Saxon, Naomi Schraer and Mark Dorman.