Brexit poses a great risk to financial service providers who are licensed with the UK Financial Conduct Authority (FCA) and offer services across the EU based on that license, as well as those who offer services in the UK based on a license from another EU country’s regulator. This type of “passporting” is a benefit of the EU single market. The UK is adamant that it will negotiate continued EU passporting rights for UK financial services firms, but it is unclear how this will work if the UK leaves the single market. The UK’s most likely option is to negotiate continued passporting rights as part of a trade agreement with the EU, but typically trade agreements cover trade in goods rather than services.
To ensure continued access to the EU market, UK financial services firms should take steps to become licensed with the regulator in another EU jurisdiction, such as the Central Bank in Ireland. One key requirement for gaining a license from the Central Bank is that the firm have a “substantive presence” in Ireland, which generally means that the firm is managed and controlled from Ireland. This is why many UK firms have begun moving operations to Ireland and other EU jurisdictions, to qualify for a license which will allow them to continue passporting across the EU.
Irish and other EU financial services firms which offer services in the UK should equally begin discussions with the UK FCA to potentially become licensed there, to ensure your ability to continue offering services in the UK post-Brexit.
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