UK Prudential Regulator Announces Details of Post-Brexit Temporary Permissions Regime for EEA Firms

The U.K. Prudential Regulation Authority has published details of the temporary permissions regime that will allow PRA-regulated EEA firms to continue providing financial services in the U.K. for a limited period following the U.K’s exit from the EU, in the event that no implementation or transitional period is agreed under the Withdrawal Agreement. The EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 brought the TPR into force on November 7, 2018. The TPR applies to EEA firms that are authorized to conduct a regulated activity in the U.K. using passporting rights and have either: (i) applied for U.K. authorization prior to the U.K. withdrawal date; or (ii) notified the relevant U.K. regulator of their intention to continue conducting passported activities. Such firms will be entitled to continue providing financial services for up to three years from the date the U.K. leaves the EU.

The PRA states that it expects firms to engage proactively with the PRA and U.K. Financial Conduct Authority during their time in the TPR. It goes on to provide information on the TPR, including:
 

• Eligibility criteria and notification processes for firms to enter the TPR – firms should notify the PRA of their intention to operate under the TPR by March 28, 2019; a notification will not be valid if it is withdrawn in writing to the PRA prior to the U.K.’s exit from the EU.
• Exit from the TPR – firms’ deemed permission to operate under the TPR will end: (i) three years from exit day (extendable by HM Treasury by 12 month increments); (ii) when a firm’s application for full permission to operate in the U.K. under the Financial Services and Markets Act 2000 is either approved or rejected; or (iii) when the PRA exercises its power to cancel the deemed permission. Firms whose application for full permission to operate in the U.K. after the end of the TPR is rejected will be expected to run-off their U.K. regulated activity in an orderly manner.
• Regulatory requirements for firms in the TPR – EEA firms will be subject to the same supervision by U.K. regulators as those operating under the U.K.’s FSMA regime. The PRA will provide transitional relief from some of the FSMA requirements for a transitional period after exit day.
• Application of the Senior Managers and Certification Regime under the TPR – the PRA and FCA have published a note clarifying the applicability of the SM&CR to firms in the TPR. Although compliance with the PRA’s SM&CR requirements will not be a pre-condition of entry into the TPR, select provisions will apply. 

The Bank of England has separately published information for central counterparties requiring authorization and seeking information on the TPR. The FCA is expected to provide information on the application of the TPR to firms subject to its regulation separately.
The EEA Passport Rights Regulations 2018 also contain provisions governing the repeal of passport rights and certain other consequential amendments and savings provisions, which will come into force on the day the U.K. withdraws from the EU.

View the BoE's information on the TPR for EEA firms.

View the PRA's 7 November 2018 Direction on Temporary Permissions Notifications.

View the PRA's 22 March 2019 Direction on Temporary Permissions Notifications.

View details of the EEA Passport Rights Regulations 2018.

View the PRA and FCA's note on the application of the SM&CR to firms in the TPR.

View details of the BoE’s post-Brexit temporary permissions regimes for CCPs and CSDs.

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