The FCA says it is working to get ready for all possible Brexit outcomes, including a ‘no deal’, but will face fewer risks to its mission if a transition period takes place.
The regulator was asked by MPs on the Treasury select committee to provide an assessment of what impact Brexit would have, either leaving without an agreement or based on the current draft withdrawal plan soon to be voted on in the House of Commons.
Responding today, the regulator has made it clear that while it is not taking a position on Brexit as such, it has now assessed the effect different kinds of withdrawal would have on it meeting its objectives to ensure markets function well.
In the event of a no deal, the FCA’s view is that this “would create significant challenges and risks in terms of firms’ readiness, potential market disruption and insufficient public-policy soltusions put in place on the side of the EU.”
It has added to previous calls that it would “strongly support an implimentation period” for markets to be more ready for Brexit.
Noting that the current draft of the withdrawal agreement would leave a transitional period out to December 2020, this would “provide benefits by removing cliff-edge risks and creating a basis to preserve cooperation between the FCA and EU27 regulatory authorities.”
However, because the FCA would no longer be able to be formally involved in decision making through votes on the European Securities and Markets Authority board, the draft “does present some challenges in terms of the risk that the UK will be subject to new rules where it has not participated in decisions around their creation.”
The FCA writes: “We would seek to reduce these risks by continuuing to engage closely with EU authorities during the implementation period, but the influence we will have is uncertain. But, to be clear, in terms of the FCA’s objectives, our assessment is that the risks presented by an implimentation period are less that the risks of a no-deal scenario.”