Now there is an "agreed" Brexit transition deal, the Bank of England and FCA have predictably move swiftly to extend passporting rights through this period via a temporary permissions regime. Just as predictably, the EBA has so far not made this statement, and there has been a good deal of commentary around the political chess this is thought to represent. As is often the case with regulation the real story is likely to be both simpler and more complex.
Here are five factors firms can usefully bear in mind, both now and when dealing with regulators on Brexit over the next year or so.
1. The default priorities of regulators are almost always technical and logistical rather than political. What do we need to worry about? Based on what analysis do we take decisions? How do we best complete the task on time with the resources we have? These challenges are multiples greater for the PRA and FCA than for their EU counterparts as no European city has a financial centre close to the size of London. A temporary regime enables UK regulators to focus first on the more complex task of dealing with the re-authorisation of EU branches.
2. A non-trivial part of London's financial reputation – linked to the volume and complexity of decisions it takes - is around being impartial and efficient, and this will come under significant scrutiny through the Brexit process. UK regulators will consequently be determined to be seen to play by the book. This also accounts for Andrew Bailey's previous comments on the UK maintaining international standards post leaving the EU. Other EU regulators are rarely subject to the same level of scrutiny, and as a result their timelines and decision making are typically more relaxed.
3. It would be a mistake to confuse these urges, to be seen as impartial and efficient, with a presumption that all currently passporting firms will necessarily be authorised to operate beyond Brexit in their existing form. Both PRA and FCA will take a fresh look at firms against today's standards, and the simple act of looking at the universe of passporting and branching firms collectively runs a distinct risk of coming up with a slightly different set of answers. Regulators abhor inconsistencies they can't logically justify and Brexit is likely to throw up more than a few.
4. For their part(s), the EU 26 may struggle to move collectively through this process and this alignment issue may be at least part of the current delay. Some of the 26 will have expansionist ambitions; some may struggle with recruiting sufficient expertise to make the necessary technical assessments; for others it will simply be a low priority. Firms should therefore not assume that they will be able to move in parallel through the various national authorisation processes towards their post Brexit structures.
5. Lastly, and more another time, a major part of the practical challenge for UK regulators, not shared by the EU 26, is to rewrite their Handbooks of rules. This is unlikely to furnish the "bonfire of red tape" so desired by some (see the urge to maintain international standards above), but should hopefully smooth out longstanding wrinkles. Given the scale of the task, however, it is all but inevitable that both regulators will struggle to achieve coherent approaches across the "new" Handbooks. This will cause considerable angst.
The strong temptation is to see the Brexit process as a series of programme milestones, each one leading to the next. In financial regulation, however, the reality is almost certainly much messier, more a case of adding different ingredients to an already complex cocktail, as they become available, while hoping to balance the proportions and overall quantities to produce something drinkable at the end.
In light of the agreement at the EU Council, the Bank considers it reasonable for firms currently carrying on regulated activities in the UK by means of passporting rights, or the EU framework for central counterparties, to plan that they will be able to continue undertaking these activities during the implementation period in much the same way as now.