EBA calls on financial institutions to finalise preparations for the end of the EU-UK transitional period
In view of the upcoming expiration of the transition period between the EU and UK (on 31 December 2020), the European Banking Authority (EBA) issued a statement recalling the importance of adequate preparations by financial institutions and calling on the institutions to finalise the full execution of their contingency plans in accordance with the conditions agreed with the relevant competent authorities and ensure adequate communication to concerned EU customers.
The end of the transition period will put an end to the possibility for the UK-based financial institutions to offer financial services to EU customers on a cross-border basis (passporting). Hence, from 1 January 2021 onwards financial institutions based in the UK and not holding valid authorisation from the competent EU authorities will lose their authorisation to provide services in the EU.
EBA has recalled that financial institutions wishing to operate in the EU and offer services to their EU customers should ensure they have obtained the necessary authorisations and effectively establish themselves before the end of the transition period. In particular, financial institutions should ensure that associated management capacity, including appropriate technical risk management capabilities, is effectively in place ahead of time, and is commensurate to the magnitude, scope and complexity of their activities, to allow for effective and efficient management of risks they generate.
Moreover, EBA has stressed that UK-authorised payment and electronic money institutions wishing to continue to offer services to EU-based customers after 31 December 2020 need to be adequately authorised beforehand by an EU competent authority. As a condition of authorisation, relevant UK-based payment and electronic money institutions are required to submit application documents that are compliant with the EBA Guidelines on authorisation and registration under the revised Payment Services Directive (PSD2).
Lastly, EBA called on all financial institutions affected by Brexit, and in particular those offering financial services to EU-based customers on a cross-border basis and benefiting from the passporting arrangement, to adequately inform their EU customers on any relevant actions undertaken as part of their contingency planning affecting the availability and continuity of such services, or whether institutions no longer plan to offer services to EU-based customers after the end of the transition period.
The full statement is available here.