In financial services, the "passporting" arrangement is key.
This is the regime that permits financial services firms, financial market infrastructures and funds authorised in any country in the European Economic Area (EEA) to carry out activities in any other EEA country. If a financial services firm is authorised in one member state it can provide services to customers in another member state without any authorisation or supervision from a local regulator.
In a 'no deal' scenario, passporting would be lost to UK firms. [There is a point here about the Chequers plan – because that did not seek to pursue free movement of services, so financial services would not be part of the free movement that hat Plan seeks to implement. So even if there is a trade deal, it is not certain that passporting of financial services as we currently understand it would continue in the same way.]
In the technical notice, the UK government makes the point (subtly) on several occasions that it can only address issue or problems for EEA financial services firms providing services to customers into the UK, and that it is up to the EU to address the issues that arise for UK firms seeking to continue to provide services to customers in the EEA.
When the UK leaves the EU, it will be outside of the EU framework and therefore the UK's position (in terms of doing business in an EU member state) will be determined by the rules of that member state (and any applicable EU rules) as they apply to third countries.
The UK will also treat EEA states (and firms in those states) as it does other countries (and their firms). The UK government has said that it will diverge from this approach to ensure a functioning legislative regime, to minimise disruption and ensure the continuity of financial services provision, especially to protect UK consumers.
One example of this is the introduction of Temporary Permissions Regimes (TPRs). These will allow EEA firms currently passporting into the UK to continue operating in the UK for up to 3 years after the UK leaves the EU, whilst the EEA firms apply for authorisation from the UK regulators. Draft legislation has been published; the Financial Conduct Authority has published its approach to implementing the TPR and the Prudential Regulation Authority has set out its expectations for the TPR.
The implications for customers of financial services firms will depend upon where those customers are based; where the firm providing services to them is based; the services that are accessed and the regulatory regime that will apply to the financial services firm after the UK leaves the EU.
Those implications are broadly summarised in the table above.
The implications for financial services firms themselves (especially those located in the UK and which provide services from the UK to customers located in the EEA) are potentially far-reaching. Whilst the UK government can address the position of EEA firms providing services to UK customers, it cannot unilaterally determine the position for UK firms providing services to EEA customers. The EU needs to address that. The loss of passporting for UK firms is likely to affect their ability to meet their obligations to EEA customers. Those firms are already implementing plans to ensure that they can continue to operate in the EU after the UK's exit, for example, by establishing EU authorised subsidiaries in the EU, and transferring the relevant parts of their business into that EU registered subsidiary. The steps that are being taken by each firm will vary, and customers should speak to the relevant firms (to the extent he firms have not already communicated with them) to determine what the position will be as between the customer and that firm after the UK's exit from the EU.
In this technical notice, the UK government indicates that a future technical notice will be published dealing with transfers of personal data between the UK and the EU. That is likely to be very significant for financial services firms (and for customers of such firms, in terms of understanding how their data may be used and transferred).