British banks lose passporting over Brexit
Britain’s departure from the European Union on 1 January means that banks and financial entities based in the United Kingdom have now lost their licence to operate on Portuguese territory.
The Bank of Portugal also warned on Thursday that all companies based in the United Kingdom which up until the end of December were authorised to operate in Portugal under the community passporting regime now no longer have that right.
On a more individual level, before Christmas, several UK banks including Lloyds and Barclays began writing to UK account holder customers living within the European Union warning them to make alternative arrangements or their accounts would be closed unless their primary residence for tax purposes is in the UK. With a deal agreed, that threat has now been averted, although some banks may still decide it is too costly in terms of paperwork and account management to continue providing some complex services and transactions for UK clients living in the EU.
With the Brexit agreement coming into force on 1 January 2021, all current European Union laws ceased to apply to the United Kingdom from that date, as well as for all those entities based in the UK.
By the same token, all UK companies which carry out their business activities or provide services in any EU country have now lost their licence.
“On 31 December 2020 the period of transition set under article 126º of the Agreement on the Departure of Great Britain and Northern Ireland from the European Union, the European Community of Atomic Energy,” states the Bank of Portugal led by Mário Centeno.
“Therefore, entities based in the United Kingdom authorised to operate on Portuguese territory under the community passporting regime — and which are registered on the Bank of Portugal’s website — will have their register cancelled with effect from 1 January 2021.”
According to a UK government web site passporting will no longer be possible after the end of the transition period.
“The FCA, working with other UK authorities, introduced the Temporary Permissions Regime (TPR). The TPR will allow EEA-based firms passporting into the UK to continue operating in the UK within the scope of their current permissions for a limited period, while they seek full FCA authorisation, if required”.
The deadline for EEA firms to notify the FCA they wanted to enter the TPR closed on 30 December 2020.
The TPR also enables various EEA funds to continue to be marketed in the UK for a limited period provided fund managers had notified the FCA before the window for notification closed on 30 December 2020.
In addition, the FCA and other UK authorities have also introduced the financial services contracts regime (FSCR). This allows EEA passporting firms that do not enter the TPR to wind down their UK business in an orderly fashion.