Brexit: Memorandum of Understanding in Financial Regulation

By Dr Michael Jünemann, Johannes Wirtz

04-2019

BaFin, FCA und PRA agree on supervisory cooperation after Brexit.

The United Kingdom’s withdrawal from the European Union (Brexit) will take effect on 31 October the latest. An earlier Brexit date is possible in case the UK House of Commons approves the Withdrawal Agreement. The exact Brexit date remains subject to possible change and a No-Deal-Brexit is still a realistic option (our in-focus page). To mitigate the impact on customers of financial institutions, the banking sector and competent authorities have taken certain actions. German Federal Financial Supervisory Authority (BaFin) and British prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) have agreed on a Memorandum of Understanding (MoU)

In the field of financial regulation, a Memorandum of Understanding is an agreement that defines and formalises a common line of action among supervisory authorities. BaFin, FCA and PRA in this MoU coordinate their regulatory practice and agree on a continued exchange of information, the cooperation in the licensing of companies and combating money laundering beyond Brexit. This prevents a hard Brexit in the cooperation on financial supervision which is currently defined by EU-rules. The model MoU used in this case was created jointly by the European Banking Authority (EBA), the European Central Bank (ECB) and national supervisory authorities. Potentially, other European supervisory authorities will follow to agree on similar guidelines with their British counter parts in form of a MoU.

The authors thank Sascha Lucas for his support.