Legislative contingency measures in financial services
The Royal Decree-law on contingency measures for the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union without having concluded an agreement pursuant to Article 50 includes contingency measures for financial services aimed at guaranteeing client protection. Legal certainty for the continuity of contracts is strengthened through a legal mechanism to allow UK firms to meet their obligations. These measures seek to prevent the impact of higher uncertainty or loss of market access on financial stability or client protection.
Article 19 of the Royal Decree-law cover all measures adopted concerning financial services. This article is intended for UK and Gibraltar financial entities that currently operate in Spain, and it contains three main provisions:
- Contracts for the provision of financial services signed prior to the departure of the UK from the EU will remain in force. It is thus made clear that contracts will not be terminated simply due to Brexit. This is in line with the statements of the European Comission.
- After Brexit, the UK and Gibraltar financial entities must adapt to third-country regimes in order to continue operating in Spain. Given that some activities related to the management of old contracts may be subject to authorization, an extension of the prior authorization will apply to manage these contracts, but it will not cover new activity. This extension will be granted while processing the request for a new one, or to facilitate the relocation or termination of old contracts. The extension of prior authorizations will expire in nine months after the departure of the UK.
- The Spanish financial supervisors will oversee this activity and may take any necessary measures to guarantee legal certainty and safeguard the interests of financial services clients.
Activities related to the management of old contracts that do not require authorization can continue regardless of the aforementioned temporary regime. For any consultation, interested entities should contact Bank of Spain, CNMV or the Directorate-General for Insurance and Pension Funds.
What has to be done to become part of the temporary regime?
British or Gibraltarian entities should contact the competent Spanish supervisor in their sector: Bank of Spain for credit entities, payment institutions and electronic money institutions, CNMV for investment firms, venture capital management companies and fund managers, or the Directorate-General for Insurance and Pension Funds for insurance companies, insurance intermediaries and pension fund managers.
The transitional period will end, regardless of the application date, nine months after the effective withdrawal date of the UK from the EU.
Other preparedness activities:
The General Secretariat of the Treasury and International Financing, together with Bank of Spain, CNMV and the Directorate-General for Insurance and Pension Funds, has been coordinating a Brexit working group to identify and assess the potential risks for the Spanish financial sector. This work has been shared with the European Commission in seminars and meetings to carry out a joint follow-up of the contingency plans.
A close communication with financial operators has been another important line of action. In order to properly assess the impact of the depature of the UK from the EU, financial sector associations have participated in meetings at the General Secretariat of the Treasury and International Financing to explain the challenges and risks arising from any possible Brexit scenario.