Published: 4th December 2018

On 25 November 2018, the EU Council of Ministers met in Brussels and agreed to the draft UK Withdrawal Agreement. The draft Withdrawal Agreement must now be ratified by the UK Parliament and assuming it does so, subsequently by the European Parliament.

The UK Parliament will debate the Withdrawal Agreement and vote on it. The House of Commons will debate it between Tuesday 4 December and Tuesday 11 December 2018. There will then be a vote on Tuesday 11 December 2018. (The House of Lords will debate the Withdrawal Agreement between Tuesday 4 December and Monday 10 December. However the motion voted on in the House of Lords is secondary to that in the House of Commons.)

The Bank of England has produced some very useful Brexit impact analysis in pages 17 – 33 of its Financial Stability Report November 2018 (see ).

The Financial Stability Report provides a useful summary of the expected impact of what the Bank of England calls a Disorderly Brexit (where the financial sector reverts to World trade Organisation rules from 30 March 2019) and a Disruptive Brexit (where there is some agreement on aspects of transition in financial markets with some market disruption, but the impact is less severe than under a Disorderly Brexit). Although it is not a forecast or prediction, the Bank of England’s analysis of a Hard Brexit scenario under Disorderly and Disruptive Brexit models, suggests the impact on the UK economy and on consumers will be quite negative to very severe.

The Bank of England also provides some useful commentary at pages 29 – 33 on issues to consider in terms of disruption to financial services, including a checklist at page 29 dealing with legal frameworks, cross-border contracts and availability of new financial services.

Impact of Brexit on Financial Services Passports

Under the Brexit Withdrawal Agreement agreed between the UK and the EU on 25 November 2018, the outbound and in-bound passporting rights (from the UK to other EU/EEA Host States and vice versa) under all Directives that provide for passporting rights will remain in place during the Transition Period, providing the Withdrawal Agreement is approved by the UK Parliament and subsequently by the European Parliament.

The passport rights will cease under one of the two possible circumstances set out as follows:

  • No Deal Hard Brexit

Passports cease from 30 March 2019 – if the Withdrawal Agreement agreed in Brussels on 25 November 2018 is not approved by the UK Parliament (or subsequently is not approved by the European Parliament);

  • Transition Deal

Passports cease from 1 January 2021 – when the Transition Period ends (unless some form of equivalence is negotiated during the Transition Period for the future UK-EU trading relationship).

It has been confirmed that the UK Parliament will vote on the Withdrawal Agreement on Tuesday 11 December 2018.

Single Financial Services Market – Passports Available

Directive/ Regulation Passports available
Alternative Investment
Funds Managers Directive
For managers:
· Cross border marketing of EU AIFs to professional investors
· Marketing of non-EU AIFs to professional investors in all Member States (in certain cases)
· Cross-border management of EU AIFs either on a
branch or services basis
· Provision of certain specified MiFID services either on a branch or services basis
Insurance Distribution Directive (IDD)

[Formerly Insurance Mediation Directive

For insurance intermediaries:
· Establishment of branches or provision of insurance mediation services
Markets in Financial
Instruments Directive
(MiFID) 2
Right for investment firms to:
· Provide cross border investment services, including
through a tied agent
· Establish a branch (subject to a notification procedure) and provide investment services from that branch outside of the passporting provisions for investment firms above, there are several other provisions in MiFID8 which facilitate cross-border activity in the EEA.
· A Member State has to ensure that investment firms
from another Member State have access to clearing and
settlement systems in its jurisdiction on the same basis
as investment firms for which it is the home Member
· A Member State must require that an investment firm
from another Member State can have access to a
regulated market in its jurisdiction either through a
branch or remotely.Member States must require that all members of
regulated markets can designate, subject to certain
limitations, the system for the settlement of their
· Subject to certain conditions, central counterparties
have to clear trades from any trading venue in the EEA
on a non-discriminatory basis. Likewise, also subject to
certain conditions, trading venues have to provide trade
feeds to any central counterparty in the EEA on a non
discriminatory basis.
· Subject to certain conditions, any central counterparty
or trading venue in the EEA has to be given non
discriminatory access to an EEA benchmark for the
purposes of clearing and trading.
· Data reporting services providers can provide services
across the EEA on the basis of authorisation in a single
Member State
Mortgage Credit Directive
For mortgage intermediaries:
· Establishment of branches or provision of services
Payment Services
Directive (PSD) 2
For authorised payment institutions:
· Establishment of branches or provision of services.
including the use of agents
Undertaking for Collective
Investment Schemes
For managers of UCITS funds:
· Management of an authorised UCITS either on a branch or services basis
· Provision of certain specified MiFID services either on a branch or services basis
For UCITS funds (not included in the data above):
· Cross border distribution of a UCITS-compliant
authorised fund to investors
Electronic Money
Directive (EMD)
For authorised e-money issuers:
· Establishment of branches or provision of services,
including the use of agents
Capital Requirements
For credit institutions:
· Right to provide banking and investment services
· Establishment of branches to provide banking and
investment services
· In this context banking services include the provision of mortgages and consumer credit (by credit institutions)
Solvency II For insurers and reinsurers:
· Establishment of branches or provision of services
  1. Certain financial services or products may be provided on a cross-border basis  under the passport system. This means that a firm based in and regulated by the relevant regulator in an EU or EEA country (its Home State) can carry out a relevant service or provide a relevant product into another EU or EEA member state (the Host State) without the need to be separately regulated by the Host State regulator.
  2. Passport rights are provided for in the relevant EU Directive that regulates the service or product concerned. EU Directives and Regulations (including implementing regulations) are part of EU law.
  3. A regulated firm wishing to utilise a passport must apply to its Home State Regulator. Providing it is satisfied the condition are satisfied, the Home State regulator will award the passport and notify the regulator(s) in the relevant Host State(s).
  4. There are two types of Passport:
    • Service Passport – where there is no permanent establishment (premises and staff) in the Host State; and
    • Branch Passports  – where there is a permanent establishment (premises and staff)  in the Host State.

How can Complyport assist firms with Brexit?

Complyport will assist firms with the following potential issues arising from Brexit;

  • Brexit Impact Assessment,
  • Brexit Risk Assessment,
  • Brexit Planning Options,
  • Business Model Impact,
  • Issues relating to Service or Branch Passports,
  • Regulatory Permissions, and
  • Regulatory Applications.
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