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UK watchdog unveils plans to continue overseeing EU firms after a no-deal Brexit

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UK watchdog unveils plans to continue overseeing EU firms after a no-deal Brexit

The U.K.'s Financial Conduct Authority Jan. 8 outlined its plans to continue regulating European financial firms based in the U.K. if the country leaves the EU on March 29 without an implementation period in place.

The implementation period is part of the exit deal drawn up between the U.K. and the bloc. It would see the existing regulatory arrangement for financial services firms continue until December 2020. However, this period will not come into force unless the exit deal is passed by the U.K. and EU parliaments. There is considerable opposition to the deal in the U.K. parliament and the government currently looks unlikely to win the vote to pass the deal which will be held on Jan. 15. The U.K. is due to officially exit the bloc on March 29.

The FCA's proposals are designed to ensure there is a functioning regulatory framework in place if the U.K. leaves the EU without a deal in place. The regulator aims to put in place the Financial Services Contracts Regime, which would allow finance firms in the European Economic Area, or EEA, which includes the EU and other countries that are part of the European Single Market, to fulfill their existing contractual obligations in the U.K.

The FSCR does not allow EEA firms or managers to take on new business after exit day. Instead these firms and fund managers will need to enter the Temporary Permissions regime. This allows EU-based firms which are currently allowed to operate in the U.K. under so-called passporting rules, to continue to do so if that scheme ends abruptly as a result of the no-deal Brexit.

The FSCR allows for the continuity of existing contracts after March 29 for EEA firms which either do not enter into the U.K.'s Temporary Permissions regime or leave that regime without full U.K. authorization.

The regulator said that allowing contracts to continue is "important for protecting U.K. consumers and minimizing market disruption."

The FCA also said it would continue to regulate securitization repositories after March 29 and it is consulting on proposals for recovering the cost of doing so.