The month of October was a busy month for the regulators, PRA and FCA who issued Dear CEO letters to financial institutions on their final preparations, for the end of the Brexit transition period. The letter is broken down into different areas where the regulators remind firms of their expectations. This month’s insight summarises the key areas highlighted by the regulators for respective financial institutions.

The key areas where firms may need to take final steps to ensure their preparedness include:

• Continuity of wholesale banking business and contracts – Among other things, firms must engage proactively with affected clients to complete repapering and on-boarding, and ensure that they have fully considered the impact on each client and whether the proposed changes are in each client’s best interests.
• Data – firms must consider how they can comply with the EU’s cross-border personal data transfer laws after the end of the transition period in the absence of a European Commission decision on UK data protection adequacy. The letter states that in the absence of a decision by the European Commission on the adequacy of UK data protection measures, the use of the Standard Contractual Clauses in relevant contracts is a way for firms to comply with the EU’s cross-border data transfer laws after the end of the transition period. Firms should consider whether contracts involving the transfer of personal data from the EEA should be updated to comply with EU requirements.
• Retail banking services – The regulators set out their expectations of firms that have retail banking customers in the EEA. In particular, they state that firms’ decisions concerning these customers should be guided by what is the right outcome for those customers and warn that, in many cases, a poor outcome for the customer will include if a firm were to suddenly stop servicing them.
• Contingency planning and continuity of cross-border business in respect of EU liabilities – firms must finalise preparations to run-off or transfer EU liabilities. Insurers should have prepared contingency plans and should have measures in place to ensure that they don’t undertake regulated activities without authorisation. Firms are reminded of their duty to inform customers about the possible impact of the end of the transition period on their customers and treat them fairly.
• Part VII saving provision – Legislation enables insurers to benefit from a two-year window in which to obtain sanction for a portfolio transfer on condition that they have paid the regulatory fee and appointed an independent expert. The letter notes that the end of the transition period will bring an end to mutual recognition of portfolio transfers under Solvency II. From January 2021, recognition will be based on national regimes.
• EEA Bank Account Closures – After the end of the transition period national regimes will determine the ability of UK banks to continue to provide services to retail customers. Accordingly, firms should review their ability to make payments to and from accounts.
• EEA Passporting firms in the UK – EEA passported firms that obtain temporary permission to operate in the UK pending authorisation as third country branches must ensure that they are operationally prepared to meet UK requirements once they enter the temporary permissions regime (TPR). Once in the TPR, firms will be subject to the same obligations as if they had Part 4A permission (subject to any regulatory transitional relief).
• TPR Part 4A application submission timeline – Firms entering the TPR should have let the PRA know when they intend to submit their Part 4A application. The PRA expects firms to submit their application in the relevant quarter and to contact the PRA if they are likely to miss their landing slot.

The regulators state this is not an exhaustive list of all the issues that may arise and that they are aware firms are also working on other matters linked to the end of the transition period. Their expectation is that firms will continue these efforts to address firm-specific risks and that they will keep FCA and PRA supervisors informed.