On December 19, the European Commission (EC) published a communication, along with a number of legislative measures, detailing its “no-deal” Brexit contingency plans for certain sectors, including financial services. The measures are limited to those areas identified by the EC as where a no-deal scenario would create “major disruption for citizens and businesses” in the remaining EU Member States (EU27).

The EC has published the communication in light of the uncertainty in the United Kingdom surrounding the ratification of the Withdrawal Agreement as agreed between the European Union and the UK on November 25 (for further information see the November 16 issue of Corporate & Financial Weekly Digest ). The EC has started implementing its “no deal”’ Contingency Action Plan in order to deliver on its commitment to adopt all necessary “no deal” proposals by the end of the year, as outlined in its second preparedness communication of November 13.

In relation to financial services, the EC states that, after examining the risks linked to a no-deal scenario in the financial sector, and taking into account the views of the European Central Bank and the European Supervisory Authorities, it has concluded that only a limited number of contingency measures are necessary to safeguard financial stability in the EU27. These measures are designed to mitigate financial stability risks only in those areas where preparedness actions from the market alone are insufficient to address these risks by the withdrawal date. The EC has therefore adopted the following acts that will apply from the date of the UK’s withdrawal from the EU, if the Withdrawal Agreement is not ratified:

• Commission Implementing Decision (C(2018) 9139)—This will allow the European Securities and Markets Authority to temporarily recognize central counterparties established in the UK. The decision will expire 12 months after the date of the UK’s withdrawal.
• Commission Implementing Decision (C(2018) 9138)—This will allow UK central securities depositories to continue providing notary and central maintenance services temporarily to EU operators. The decision will expire 24 months after the date of the UK’s withdrawal.
• Commission Delegated Regulation (C(2018) 9047) and Commission Delegated Regulation (C(2018) 9122)—These Regulations will exempt over-the-counter derivatives contracts that are being novated from a UK counterparty to an EU27 counterparty from margining and clearing obligations under the European Market Infrastructure Regulation for a period of 12 months.

The European Commission’s communication is available here.