After the UK announced that it would leave the EU zone, everybody knew that it would affect most of the sectors. This prediction was right because after 31 January 2020, when the process of Brexit officially finished, the rulebook, and requirements for most of the sectors significantly changed.
Because it was no longer mandatory to accept the EU requirements, regulators changed some of the parts of operations which significantly changed the allowance area as well as business details for most of the financial companies. For example, the FCA, which is the main regulator in the UK, changed a lot in its requirements list, which all licensed companies must consider. In the UK, the FCA has licensed more than 50 000 financial companies. So changing regulations definitely would affect customers too. With the quantitative statistics, the financial market picture of the UK significantly changed.
For example, after Brexit, more than 400 financial companies left the country. Also, 10% of existing assets moved to the EU, which is more than 900 billion GBP in total amount. Customers no longer use dozens of services and more than 7 400 people lost their jobs because their companies were moved out of the UK. This is how to step by step London is not the biggest financial trading centre in the world and moved to second place after Amsterdam.
What Were the Main Legislation Changes In the Financial Sector After Brexit?
Even though many things have changed which will be described in detail a bit later, FCA-regulated brokers still provide high-quality and guaranteed safe service to their customers. For those who were not UK-based companies but were operating in the country, the government created TPR, which is the same as a temporary permissions regime that allows such companies to continue their business for a specific period and then get official authorization.
Brexit also caused the creation of FSCR, which stands for the financial services contracts regime. This is the new regulation document which is for those who are not part of TPR. This will give them the possibility to finish their business and serve every existing contract and after that finish their operation in the UK.
The main fields that are not represented in new regulations are mostly connected to investment and insurance businesses, home finance intermediations, and the debt management sector.
The remaining companies, which still continue operating in the UK financial market, are regulated by FCA. There is a list of UK Forex brokers that even improved their services as well as internal regulations regarding the quality of service and its safety.
Other common changes in UK financial companies were connected to the field and used resources. For example, Brexit increases requirements for providing open financial services. The main priority is to create a transparent, global financial hub. On the technological side, the level of using fintech is significantly raised. Also, cryptocurrency trading has improved. UK companies have started to focus more on green finances. They are more required to accept the global goals for 2030.
Which Specific Regulations Have Changed For Financial Companies After Brexit?
The picture of existing regulators has not changed after Brexit. Again, the main financial regulators are the FCA for UK companies and the CBI for Irish companies. The main changes for FCA regulating areas changed in transaction reporting features. EMIR and SFTR report requirements also have slightly changed regulations for short selling and securitization. Increased the prioritization of CASS which stands for Client Assets Specialist Sourcebook.
Even though many changes were implemented in the reporting requirements for a better data archive, a more important and influential change was for customer authentication requirements. The regulator activated more strict regulations for payments and withdrawing operations to avoid the increased number of crimes. Especially, the focus was on online shopping processes, where now customers need to insert more information for better safety and shoppers need to prove their identity and fairness with higher requirements.
The most complex sector of financial services is connected to share trading features. As the FCA claimed, they still have a very active discussion with ESMA to set the specific, user-oriented requirements for mutual sharing trading. After Brexit increased the monitoring process for scam companies. More specifically, FCA published new 1 3000 records about scam transaction warnings. This is why the process of cashing out is under more strict regulations.
After the discussion with Google, FCA changed the way financial companies publish their ads on the platforms. Now there are more limited policies and only FCA-regulated financial companies can use Google advertising services. The FCA also published an Online Safety Bill document and changed the payments from crypto-assets. It required crypto companies to register and manage their assets in a more transparent manner. Because of that reason, 90% of crypto companies’ transactions for withdrawal were declined by the FCA.
The regulations also changed and reduced the amount of financial burden. Because of the covid crisis, the payment deadlines for credits changed too. Financial companies who were provided debt advice are under strict regulations, whereas 6 companies could not handle the new regulations and closed their businesses. On the other hand, an increased number of fined companies such as NatWest. In total, the fine for financial companies was more than 568 million GBP. The FCA also changed sandbox requirements and made loyal programs more dynamic to avoid price raising.