The government has warned UK financial services firms are set to lose the right to market their products into the European Economic Area (EEA) post-Brexit, unless EU authorities take action to prevent it.
In one of its 25 technical notices, published on Thursday (23 August), outlining contingency plans for financial services in the event of a no-deal Brexit, the government said it was taking "unilateral action" to prevent such disruption.
It explained: "Unless the EU acts to maintain continuity, then UK financial services firms passporting into the EEA will lose the ability to do that at the point of exit.
"This may have implications for their ability to meet contractual obligations with EEA-based clients, where to do so without EEA permissions would breach relevant member state rules and any applicable EU rules that apply to third countries.
"The government has committed to taking unilateral action, if necessary, to resolve this issue on the UK side.
"However, this is not sufficient to fully address the risks, and coordinated action with the EU is necessary."
Responding to the government's technical notices, Chris Cummings, chief executive of the Investment Association said the trade body welcomed action from the Financial Conduct Authority to draw up bilateral Regulatory Cooperation Agreements, as well as similar action from the Treasury, and urged EU lawmakers and regulators to reciprocate.
He added: "Firms now need to see similar commitments and public statements from European authorities.
"The most important step to protect our industry, and more importantly, the savings of millions of people across Europe, is for a comprehensive deal to be completed by March 2019."
Speaking on Thursday, Brexit secretary Dominic Raab said the government does not want, or expect, the UK to leave the EU with no deal, but was issuing the guidance as a precaution.
Raab said he had "every reason to believe" a "reciprocal" arrangement would be made with the EU, but "we will be ready if our expectations are not met".
He added the technical notices are a "sensible, measured and proportionate" approach to dealing with the possibility of no-deal.
Despite warnings of UK firms' capacity to market into the EU, the government also assured asset managers it is doing everything in its power to ensure UK-based firms will be able to continue managing funds domiciled within the EU, post Brexit.
The technical notice explained that under EU legislation it is possible for fund managers to delegate portfolio management services to a third party in another country, including countries outside the EU.
It added: "In relation to funds and managers authorised under the relevant EU legislation, there are requirements for cooperation between the supervisory authorities in the relevant EU member state and the non-EU country concerned."
The government is therefore prepared "to agree cooperation arrangements with their EU counterparts as soon as is possible, which is a technical exercise to bring the UK into line with other third countries", the technical notice said.
"Unless the EU confirms it does not intend to put such arrangements in place, asset management firms can continue to plan on the basis that the delegation model will continue," it added.
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